In a typical true bypass lopper, the signal is switching between two parallel paths. One re-routes the signal to the effect you want to bring in and out, the other is that little wire at the bottom of the switch.
These switches have two "throws" per pole, which means that the middle position of each column (or "pole") switches between connecting to the terminal directly above it and the terminal directly below it. The middle is "common", because it connects to both the top and the bottom. The top only connects to the middle, and the bottom only connects to the middle, but never at the same time.