I do believe it's the changeover control for the S and E setting on the auto-box.
So much on these cars is pneumatically/vacuum controlled and the gearbox is no different.
The S & W switch is electrical, and switches this valve on or off.
One way it vents to air, the other connects to the inlet vacuum.
At least that's my understanding of it. You can confirm this by getting a helper to switch over the S E switch in the car and keeping your ear by the switch.
Unless we're talking about something different
On my RHD version, it's on the LH inner wing/fender screwed to the strut area.
1994 E200 Wagon 115k miles