I sat there and gave some thought and said what is the point of on-off for day/night. When it is on, it's not any darker in the day??? I really don't know the mechanics of what makes it work but it is not as dim as say a good old fashoned move with you hands mirror.
I have no clue why it is an option to turn it off.
Their are 2 light sensors. One aimed to the front to tell how much daylight there is. The second aimed to the rear to detect the amount of light from the headlight behind you. If you block up the front sensor the mirror will max out it darkening capability. Basically that is it. Some mirrors have adjustments. You can also glue a little spherical lens over the, to the rear, sensor to increase it's light gathering capability.
basically a voltage is applied to an electrically conductive film to cause that thin films molicules to "lign up" with the voltage field this rotation in effect allows only light of that polarization to pass. This film is place over a fixed polarization film. The interplay of the two regulate the amount of light that can pass thru. Take a look here for more info. http://www.colorado.edu/physics/2000/polarization/