Graphics switching is where the integrated graphics is switched for the discrete graphics when more performance is required (and where performance is more important than battery life & heat output).
You can see the current graphics card that is enabled, and forcefully switch between the two, with gfxCardStatus.
- Integrated graphics should be used when you need battery life over performance (the Integrated Only option in gfxCardStatus can be used to force integrated graphics in circumstances where OS X believes that the discrete graphics is required).
- Discrete graphics should be used when you need performance over battery life (this is usually not required to be set manually with the Discrete Only option since OS X is happy to switch automatically).
- Dynamic Switching uses the default OS X graphics switching.
When 'Automatic graphics switching' is disabled in the Energy Saver system preference pane, only the discrete graphics is used.