It adjusts the angle of the plastic part that holds the drivers a little - so to apply more or less pressure against your ears.

Firm is, well... firmer (more angled towards the head) and light is as the name suggests lighter (the structure to which the drivers are attached is angled slightly outwards to apply less pressure).

Hope this helps. I just leave mine on firm because it doesn't bother me, but the difference, although not huge, is actually noticeable.