What year is the truck? Is this a carb or TBI? Manual switch is basically a hack to get the thing working. Somebody probably had problems with it and gave up or swapped the trans and couldn't make it work. The best setups are the factory ones, really. For TBI, the ECU controls lockup. For carb, there is a vacuum switch and an extra valve in the valve body to manage lockup. There are also aftermarket kits that can lock based on vehicle speed.
If your switch is working, you will notice the engine speed dropping a 100 RPM or 2 when it locks. Alternatively, if it is locked, the engine speed should raise when you tap the brake pedal. With the TBI trucks, it's possible to maintain lockup at all times, which is very bad. If you come to a stop with the TCC locked, it will stall the engine. Plus you'll wear it out.
If it's a 700R-4 trans, it's possible your switch is only controlling the option of lockup in 3rd gear, with it always working automatically in 4th gear (mine is set up this way). You don't want to run in OD without lockup - too much heat.