The switch lug (that is what the manual calls it) controls the over-charge protection circuitry. My 60 CT1/CT2 manual says "When using a 'Dryfit' battery, it must be in the 'Dry' position."
Here is a link to the page on the Metz site that has a bunch of Metz manuals, including (near the bottom) the 60 CT4:
EDIT: I've just checked the instruction manuals listed on Metz' site, and it appears that Metz has done away with the switch lug in the current CT series flashes, as there is no reference to it in the current CT-1 or CT-4 manuals. That makes a certain amount of sense I guess, given there aren't a lot of the old style lead-acid batteries still around, and the "Dryfit" batteries work so much better (IMHO) than any nicads I have ever used.