Just another input to the stop button circuit. He has to back the chuck up slightly because the cutter is buried in the part is my guess. If he had put a thread relief on the part he wouldn't have had to do that.
The switch and cable plug are very long. If he backs up the switch as far as it can go toward the chuck, the cutting tool is still quite a distance away from the chuck. If he mounted the plug for his cable on the front panel of the lathe, he could work closer to the chuck. Just an observation. Good idea, though. Hope the switch never fails, or there will be a spectacular crash.
I think y'all are right about him rolling the chuck backwards by hand to back the carriage off the stop switch. It's interesting that he installed another fuse. Would like to see his control circuit. I kind of like his ingenuity.
As for his stop switch failing and causing a crash, I don't know if that's any more likely to happen than the front panel membrane stop button or the emergency stop button failing. If I did such a mod, it would be for threading to a shoulder like in the video, but I think I would set it to stop a hair short and finish turning to the shoulder by hand, just to give the whole system a little cushion.