If you read the owners manual, it will describe how it works.
The Traction Control (TC) controls only wheel slip on acceleration. The Vehicle Stability Control (VSC) and Anti-lock Braking System (ABS) are permanently installed in the vehicle and cannot readily be turned off (though I have a DIY on this...).
The TC works by cutting engine power via the throttle/gas, when the sensors detect the wheels slipping under acceleration only. This helps some times in situations like rain or light snow. An amber light will flash on the dash when it is working.
The owners manual actually suggests turning it off when you're starting out (from 0 mph) in deep snow, sand, or mud, so you can use the throttle to spin the wheels faster, which forces the tires to "claw" their way out of said situations. When turned off, the light on the dash will tell you so.
This is not an automatic specific function either; this button is equipped on all Scions.
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VSC works when you are slipping around a turn, from the rain, snow, or going too fast. The sensors, on all 4 wheels, will detect if one wheel is slipping faster or slower than anticipated/programmed, and will lightly apply the brake to a specific/individual wheel as needed. I have found this very helpful at times in situations that have caught me off guard. A light will flash on the dash, and a beeping noise will sound when the VSC is working.
ABS: you can use google for more info on what ABS is and how it works, but on our cars, in an emergency stop situation when the brake pedal is pressed very quickly, there is a brake booster that makes the vehicle stop at maximum force with ABS to make the vehicle come to a complete stop... as quick as it possibly can (something that most drivers cannot do). Once this is enabled, you can't undo it until you are fully stopped... of course, you won't be focusing on that during that situation anyways, and will be very thankful that it did it lol.
---------- Post added 08-15-2013 at 10:32 AM ----------
*By "cutting" engine throttle, I meant "reducing".