This 5 position selector switch allows you to select which individual pickup or pair of pickups are active.
Each pickup has a unique sound which is related to its position and the amount of string movement that occurs at that position.  The strings have much more movement at the neck pickup position than at the bridge pickup position and the neck pickup has much more volume and bass responce as a result.

Click here for a sound sample (begins at position 1 and moves through to position 5)

Position 1 (closest to headstock) = Neck pickup on, all others off
Position 2 = Neck pickup and Middle pickup on, bridge pickup off
Position 3 = Middle pickup on, all others off
Position 4 = Middle pickup and Bridge pickup on, neck picup off
Position 5 (closest to the tail) = Bridge pickup on, all others off