As an owner of one of these, let me give a little info on how it works.
It's essentially a kiddy version of Pachinko on a huge scale: you spin a Pokeball in the front, they bounce down, and Pikachu catches them. That much is visible in my video (linked above). Pikachu is on a conveyor belt of sorts, and there are two slots behind the cutout that the balls go through.
Default prize size is 2". The prize motor on mine doesn't work and I haven't figured out how to get into it so I have no clue how it dispenses them, but it looks like it rotates to push a capsule out, much like the mechanisms in the capsule machines food places have only machine-powered. If anyone has one that dispenses them properly and would be willing to help that would be great. It originally took special Pokeball capsules with Pokemon toys inside, Sammy USA used to sell them but after Sega bought them they haven't been available so they're really hard to come by.
The amount of balls necessary to win is unchangeable (20) but you can tweak how many seconds the player has to catch them. You can also put it on free play and give it credits by spinning the wheel. Default time (I believe it was 30 seconds) is almost impossible for anyone, especially kids, but I've done it a couple of times. I have mine set to 45. It's kind of addictive to compete for score even if you don't have capsules.
Parts for it are hard to come by but it's all fairly straightforward machinery, so if something goes wrong it shouldn't be too difficult to fix. Got mine as non-working, after a few hours of tinkering it works fine aside from the prizes not dispensing.
Hope this helps. Lucario is a good guy and a good seller.