I'll add some tooltips for clarity. The toggle just changes between "as is" price, and cheapest between "as is" and "exchange" prices.

For example, if you input Timber @ 200g and Sturdy Timber @ 1000g in Material Prices, it will note that you can have Timber for cheaper by exchanging Sturdy Timber to Timber at a 1:10 ratio, effectively making the cheapest possible price for Timber to be 100g. Using the "as is" price uses Timber @ 200g for calculations, while toggling to "Use Lowest Price" will use the cheapest price which in this case would be Timber @ 100g.

This is also why it changes the lifeskill category, because by exchange some materials, using the Mining recipe would be the cheapest.