The magnetos use engine rotation to power the spark plugs.
If you turn it on OFF the spark plugs will stop firing and the engine will quit.
If you put it on LEFT or RIGHT, one of the two spark plugs per cylinder will stop firing, but the other will still do sparks, thus explaining the small loss of RPM.
Why two spark plugs per cylinders ?? -- best firing and security.
If you turn in on OFF and it doesn't stop, there's a problem with the electric system (that's why you check the OFF position during the engine shutdown checklist and also during run-up)