The IN/OUT switch is controlling all the ByPass Relays on both the MIX OUT and the normal OUTPUT.
IMPORTANT :
The FAIRCHILD670 mkII is designed to let the signal go through when the unit is turned OFF.
It is like an Automatic By-Pass, thus allowing you to only turn the unit ON whenever you are ready to print some stamps or process audio.
It also prevents you from having to re-patch the signal and have interruptions when the unit is OFF.
—> I recommend to try to keep your unit OFF whenever you don't really need to print a file or to recording through it, it will extend the life of your tubes a lot in the long run.