Basically, when you find that you aren't getting traction you have the steering wheel straight and lock down on that differential lock and either command the tractor forward or backward (based on which direction you think will get you out of the mess you're in). Figure it as a last resort: first resort is to switch to 4wd- if you're running in any condition that you think you might have traction problems in you're best to start out in 2wd and when you sense trouble go to 4wd and get out of harms way- if you fail to abide by this method and you still get stuck they the diff lock is pretty much your Hail Mary.
With the knob, you can also lock your mower or whatever implement you have on the rear, in a full up position. Sometimes you want to do this
when using the front loader to give full hydraulic power to it. At least that's how I use it.