Think about it this way.
Whatever position you have the switch in, is what is powering not only your engine cranking, but also your house electrical load. However, it’s also the only thing getting charged by the alternator when the engine is running. So if only one battery is selected, the other one is isolated and remains in the charge state it started in. If “both” is selected, then both batteries are being charged, but both will also be drawn down if using power with the engine off, potentially leaving you without a sufficient charge to start the motor.
That said, there’s no major consensus on the right way to run that type of setup. The BEST option would likely be to start the motor on one battery, then switch to BOTH for the ride out to ensure both batteries are fully charged. Then, if you’re going to turn the motor off and drift while using electrical power, switch back to one battery while the engine is off. That way, no matter how discharged the online battery gets, the other battery is fully charged for engine cranking. Then, repeat the process when making the longer run in at the end of the day. For short start up and moves, I’d recommend keeping it on one battery- that way, that one battery is getting all of the charging current during the shorter engine run time.
As you can imagine, that can end up being a lot of battery switching back and forth, and if you forget a step somewhere you run the risk of two dead batteries and no way to crank the motor.
A far better solution is to simply separate your batteries into house and start circuits, using a BEP switch or another type of dual-circuit switch with a DVSR to charge both batteries. With that system, it’s just two switches on at the beginning of the day, two switches off at the end. No chance of a discharged cranking battery. That modification has been discussed at length here; a quick search should yield all the information you could want.
As an aside: do you know which of your batteries are designated 1 and 2? It doesn’t always line up with the switch dial positions. Probably worth taking the switch off the bulkhead and checking out which lead is on which terminal.