The short answer - as far as I can tell - is it's a tone control with two 'settings' that you move between. The pickup can be imagined as being set up with a tonal 'palette,' and you're selecting where on the palette the output signal comes from.
Another short answer is that it doesn’t look like a very good thing to build into a normal guitar with passive circuitry. All settings will be significantly duller sounding than that achieved by a standard tone control.
The reason is that there is too much connected directly between the input and the ground, which would load the delicate (or high impedance) signals coming from the pickups. There’s a 0.004 cap in series with a 100k resistor, and also a 0.01 cap in series with a 39k resistor. Those will permanently trim the high treble from the sound, no matter what the pot is set to.
This circuit would work much better with a low impedance signal, such as if there was an active buffer circuit before it, and I’ve found it useful in stompboxes. Duncans Tone Stack calculator has this configuration built in, as the ‘Big Muff’ tone stack (one value changed), and it does the following, showing the range of responses when the pot is swept: