I wrote this out a little while ago in another thread, hopefully it will help clear things up. This is how my 2010 works, and I believe all 2008+ work this way.
Here are the Systems that the truck uses
ABS - Antilock Braking System. Prevents wheel lockup during braking to keep control over directional changes while braking hard or in a panic situation. A modern 4-Channel ABS system can individually brake each wheel as needed, and monitors all four wheel speeds in relation to each other. The ABS is always "ON". You cannot (conventionally) shut it off.
ATRAC - This is Toyota's Traction Control. It applies the brakes to immediately stop a spinning wheel. Can also retard engine timing to reduce power applied to the driveline. When loss of traction is detected the wheel slip light flashes until traction is returned. This is not related to the Auto LSD function, and this light functions in all driving modes to let the driver know wheel slip is happening. ATRAC is defaulted to "ON".
VSC / TSC - Vehicle Stability Control / Trailer Sway Control. VSC uses the ABS sensors along with steering wheel angle sensor, gyrometer, and yaw sensors to determine if the vehicle is not following the path intended by the driver. Will apply brakes and cut throttle to "steer" the vehicle back into the intended line of travel. For 2011 and later year trucks, the VSC system also incorporates Trailer Sway Control, which detects trailer sway, and will apply brakes to help maintain directional stability while towing. If the VSC system is turned off, Trailer Sway Control will not function. VSC, and subsequently, Trailer Sway Control, is defaulted to "ON".
Auto LSD - Automatic Limited Slip Differential. The Auto LSD senses wheel speed differences between the two REAR tires only, and lightly applies the brakes to add drag to the wheel that does not have traction. This simulates having traction to that wheel and forces equal amounts of power to both sides of the differential. If the initial light pressure does not work, the system will gradually apply more "drag" to that wheel to help send power to the other side of the axle. It does not cut power from the engine. Auto LSD only works in 2wd, and is defaulted to "OFF".
In 2wd:
Normal (no buttons pressed, no dash lights on) = Truck will detect wheel spin and retard engine timing along with application of the brakes to the spinning wheel as needed. Vehicle Stability Control is on. ATRAC is on. Auto LSD is off.
One Push ("Auto LSD" light on) = Same as Normal, but with the addition of the Auto LSD function. Auto LSD overrides the ATRAC function, so the truck does not cut power from the engine. VSC is still on.
One Push for 3 Seconds ("Auto LSD" light on, "VSC OFF" light on) = Same as One Push, but without VSC functionality.
Second Push for 3 Seconds ("Auto LSD" light off, "VSC OFF" light on,"Traction Control OFF" light on) = No functionality of the ATRAC, Auto LSD, or VSC systems. The truck does not intervene when traction or directional stability is lost.
In 4wd High:
Normal (no buttons pressed, no dash lights on) = Truck will detect wheel spin and retard engine timing along with application of the brakes to the spinning wheel as needed. Vehicle Stability Control is on. ATRAC is on. Auto LSD is off (does not function in 4wd.)
One Push ("Traction Control OFF" light on) = Same as Normal, but without the ATRAC function. VSC is still on.
One Push for 3 Seconds ("Traction Control OFF" light on, "VSC OFF" light on) = Same as One Push, but without VSC functionality. The truck does not intervene when traction or directional stability is lost.
In 4wd Low:
Normal (no buttons pressed, "VSC OFF" light on) = Truck will detect wheel spin and retard engine timing along with application of the brakes to the spinning wheel as needed. Vehicle Stability Control is off by default. ATRAC is on. Auto LSD is off (does not function in 4wd.)
One Push ("Traction Control OFF" light on) = Same as Normal, but without the ATRAC function. VSC is still off. The truck does not intervene when traction or directional stability is lost.