Ahh - think I may have been off the mark with my first post sorry - if you could say what model of Impreza you have got that may help confirm an explaination but I believe what you have (after a wider bit of reading) is a differential setting of high and low - this is an offroad 4x4 thing, common with lots of landrovers landcruisers etc.
"Low-ratio gearbox.
A gearbox suitable for normal driving is not ideal for tackling extreme conditions like steep hills or very soft ground when off-roading. Consequently off-road cars are often fitted with a second, lower-ratio gearbox which means better traction. Low ratio is normally engaged by a second lever next to the main gear lever and turns the wheels slower, reducing the risk of losing grip.
An increasingly popular alternative to a low-ratio gearbox (which adds considerable weight), is to use electronics to minimise wheelspin.
The Subaru Impreza hatch is unusual as it's a road car with a low-ratio gearbox. Toyota Land Cruiser, Mitsubishi Shogun and Jeep Grand Cherokee all use a low-ration gearbox."
Parkers.co.uk.
Low diff. is to help you to get out of sticky situations ie. if stuck in the mud or to climb very very steep slopes by having a very low first gear option as well as distributing power evenly to all wheels.
the idea is to distribute torque evenly to all 4 wheels to achieve max grip on the road surface.
On normal driving conditions for the so call AWD, the torque transmitted is either front or rear wheel bias. Only when the differential gears is activated, then the torque is spread evenly.
Apparently it will deselect the Low Diff setting if / when you increase speed
Hope this helps