Ok. Here it is. IP stands for Iphone and NK stands for Nokia. Both companies connect different part of earphone to different conductor point (read below). Although, other companies also follow one of the two connecting methods, but Apple and Nokia was where it all started.
An earphone Jack looks like this (Parts are labelled)
The tip, two rings and sleeve are called conductor points. The black rings are Insulation Rings that separate conductor points. An earphone consists of many parts ( a mic, two earpieces etc). All the parts are connected to a separate conductor point. The only difference is in "which part is connected to which point". There are two standards for this. The first, known as CTIA (Cellular Telephone Industries Association) or American Headset Jack (AHJ) standard which has the microphone connector point on the sleeve end (i.e. microphone wire is connected on sleeve end), with the signalling (or ground) connector on the second ring.Apple uses a similar connector arrangement. The second one is OMTP (Open Mobile Terminal Platform) standard. Nokia & Lenovo Mobile initially adopted this standard. It has the signalling connector (ground) next to the sleeve, with the microphone connector on the second ring. See the image below:
IP and NK switch is basically a switch between the two standards ie CTIA and OMTP thus making the earphones universal.
PS: Apple uses CTIA standard but uses a non-standard microphone and control signalling method due to which many Headphones/earphones specifically designed for iPhones or other apple products are incompatible with other devices.