Hi Calvin,
In the past I asked the same question at the dealer More Music here in Holland
Answer:
The switch is to connect or disconnect the grounding. Position 1 is disconnecting, position 2 is connecting.
It matters whether you play XLR or RCA. With XLR you have an extra ground point and it might play better on setting 1, with RCA on setting 2. This is something you can determine experimentally.
BR Ismaël