This is one of several variations of the word span test, used in many studies of working and short-term memory. It is a type of memory span test:
... memory span is the longest list of items that a person can repeat
back in correct order immediately after presentation ... Items may
include words, numbers, or letters.
Short-term memory is a cognitive capacity that is a component of verbal intelligence. However, the simple word span is not a great measure of verbal intelligence:
... memory span with digits and words is only weakly related to
performance in complex cognitive tasks such as text comprehension,
which are assumed to depend on short-term memory.
Performance on verbal memory tests can vary substantially based on the parameters of the test, the effect of practice and training, and the testing environment.
Nonetheless, research suggests that strong performance on the word span task - in particular, the non-word span variation which uses "pseudowords" that sound like real words but aren't - is indicative of superior secondary language acquisition capability (Juffs & Harrington, 2011). There is also some evidence that word span may be predictive of ability to follow complex instructions (Kim, Bayles, & Beeson, 2008; Jaroslawska et al, 2016). Of course, these results may not be applicable to the word span recognition variation of the task.