There's different thumbstick parts for LCD and OLED, the switch you're talking about is only on the LCD thumbsticks, and it's for switching between type A and type B sticks (the LCD originally had 2 different thumbstick parts that aren't interchangeable). When replacing sticks for the LCD deck, you used to have to check if you had A or B sticks and order different models depending on that, but the added A/B switch means there's now only one LCD stick model to buy.

The OLED sticks have some completely different design parts, for example the LB/RB buttons are actually part of the OLED stick, which is nice since those can be permanently ruined by dropping the deck. Repairing broken LB/RB on the LCD deck is much harder, but changes like this means you can't have interchangeable sticks between LCD and OLED.