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Question: Probably a stupid question; Does the toslink just activate depending on whichever device is on at the time? Have a gaming headset w/multiple consoles
Document: I just got this device and am returning it the same day I got it. I was looking for a solution to the HDMI audio 5.1 conversion to toslink.There are multiple reviews on here that say it does convert 5.1 however they are wrong. the sound that comes out is good quality but it is far from dolby 5.1 even in the 5.1 mode that is activated by moving the pins did not bring it into 5.1.
I actually have to manually set the DVD player every time to 720p for it to work through the switch. Then it takes a few screen flashes - the noise screen (hadn't seen that one in a while), then a green screen, then the Samsung screen finally to shows up - probably a good 15-20 secs.
This switch does what it says! Combines multiple HDMI signals (audio and video) and allows video throughput to your display (TV) and the audio to be outputted by  Toslink (optical digital sound) to your AV amp. It also has coax audio out I believe but I didn't try it.Unit is also recognized by Harmony/Linksys Universal Remote--I have the 1100 with a touch screen.
My older HDTV only had 2 HDMI ports preventing me from adding a WDTVLive to my TV w/o losing my blueray player. I also had an issue where I needed to convert my TOSlink on the Blueray and my WDTV Live to coaxial digital to feed my soundbar which does not have an optical input. This does this all seamlessly. The icing on the cake is that it also works with my Harmony 900 remote and has never missed a beat when it comes to input selection  based on activity.
Ended up returning my first one because although it claimed to be the latest HDMI standard, it would not allow my HTPC to go above 720p without continuously connecting and disconnecting the signal. Second one, same deal. I bought all new cables for all of my hardware, thinking that was the issue and it still would not work. I spent hours connecting one device at a time and swapping cable configurations.
Purchased Monoprice 4x1 HDMI Switch w/ TOSlink & Digital Coaxial Audio Output (Audio Return Channel/3D/CEC Support) on Feb 28th 2013.The unit worked fine for 5-6 months but now shows two major issues:1) After turning on the attached HDMI connected TV the switch no longer automatically comes on. I can sometimes fix this by unplugging the power from the switch and the re powering the switch, at which point it can again sense the connected HDMI tv coming on and power up automatically.
This puppy also works with Chromecast! Now I have my cable box, PS3, and a mini PC all hooked up to my projector and can switch the inputs easily with the press of a button. I really can't find any faults with this device.I guess if I had to nitpick I would say that the transition from one input to the other can look like it's glitching out depending on what screen you have it hooked up to.
I got this to plug my turtle beach headsets into directly for source audio. (px4,xp400) Sounds great, pictures just fine. a must for headset users that need an optical port, ps4 picks up ddigital perfect and no sound lag, which happens with tvs to often, and dint have to keep switching from tv to headset sound on ps3.
Time will tell.
This may be because I shut down and startup the switch every time I leave / enter the room. But, a quick turn off of everything and back on solves it 100% of the time so far.
Answer: If I understand your question correctly, the answer is yes.  Toslink output switches along with input selection.  It does not output audio from all sources simultaneously.  Hope this helps!