Good question
Typically, a Stratocaster like guitar has 5 pickup positions and only 3 pickups.
Playing them amplifies with a bit of overdrive of distortion will make it more obvious.
This described a STANDARD wiring, although there are many options and I'm not sure how your guitar is wiredTypically, setting it on the setting with the switch pointing at the headstock of the guitar, you selected the neck pickup. This pickup will sound less sharp, a bit muffled perhaps on some guitars but also warmer, a bit more with the qualities of an acoustic guitar. Better for strumming along, typically names the "jazz player" pickup also

I use it for fingerpicking on my electric as well
Moving it to the middle selects the middle position and moving it the furthest away from the headstock is the bridge pickup; defined, more powerful, sharp, pushing,... I use this setting often for my high gain stuff. Use it with overdrive and distortion and you will notice the difference!

Now, what are the settings in between?
They are often used to combine 2 pickups, wiring them in series or parallel.
They are referred to as "in between settings".
When on the bridge pickup and moving back up 1 notch, your (often) select bridge AND middle pickup.
the other "in between setting" selects middle and neck.
This originates from the times the in-between settings didn't really exist but the selector was engineered that you always had a flow of signal coming through when changing pickups.
It's clever engineering to have no silences and pops while switching right in between strums.
Artists would block the pickup selector in a setting between them, because of the interesting sound.
It was noticed and the
exploit became
a feature
Nowaways you can get a lot of different wiring schemes, all having different effects to the sound;
parallel wiring, serial wiring, push/pull knobs to 'tap' a humbucker (only using one coil of it, making it a single coil pickup" etc.
You have a HSS configuration.
The H is a humbucker and it consists of 2 serial pickups but with opposing wiring to cancel out hum. Hence the name "hum bucker". The wil sound fuller and fatter but might miss that extra top sparkle and edge a single coil pick-up might have. singlecoils can be noisy but it the middle pickup is reverse wound, the in between settings on the pickup selector simulate the effect of a humbucker: 2 single coils wired opposite of each other. This works well for noice cancelling. My workhorse Strat features that option.