Disconnected part near rear left tire 2004 Prius

Looks like headlight leveling mechanism. If it is, the dangling piece should be welded to the side of the solid rear cross beam.

Weld failed due to rust? Look for weld remnants on the beam, that's where it should go, get it rewelded. I would try to squirt some grease into all the elbows, try to loosen them up first.

 

Here's some info from Repair Manual. Unlike third gen, second gen headlight leveling mechanism looks to be bolted. There's a couple of studs on the axle beam, the bracket drops over them and is secured with nuts. Maybe the elbows in the mechanism seized from lack of lube, and the studs snapped off, aided by Michigan winters?

Periodic disconnection of this mechanism from the rear axle, working the elbows back and forth, occasional fresh lube, should be in the maintenance schedule. Sadly is not. A good lube might be something that sprays in liquid, then gels.

I have a can of garage door roller lube that works like that: good for getting grease into linkages:

Fehr Multi-Purpose Lube (Blue) X 12 Cans

The guy that last did our garage door opener left me the can.

 

Paying more attention, looks like the bolts and studs are intact, the bracket has fractured:



I'd guess because the linkages are rusted solid. The rear axle goes up and down with bumps and something had to give. Maybe you could work the linkages loose, get those nuts off, and cobble an L-shaped braket with roughly the same dimensions, you might be out of the woods. The electronics might be seized as well though.

All of this is so you're headlights go up and down with movement of the car. It might be ok to just leave it as-is, keep going. Looks like rust is really taking a toll.

Here's another thread:

Headlight leveling sensor failure - detailed post with pictures | PriusChat