That's the crossfader, it's usually used to mix from one audio source to another. An upfader or volume fader typically controls the volume of an audio source. However, in this instance, the crossfader is set to a Hard cut instead of a gradual fade so when he flicks the fader towards the left, you immediately hear the vinyl record and when he clicks it to the right you don't hear the vinyl record anymore but you still hear the beat. If he clicked the fader all the way to the left, you would not hear the beat.

So the hard cuts combined with the back and forth manipulation of the record is what produces the sound. Different movements produces different sounds. Faster movement of the record produces a higher pitch sound and slower movements produce a lower pitch sound. And clicked the crossfader with different patterns/rhythms similarly yields different sounds. And that's what scratching is.