DCCD: Driver Controlled Centre Differential
This is another big subject, here's a compilation of information.
Useful info and first hand experiance welcome. please no 'i kan do phat dccd skids' spam please, it will be bumped off into general or off topic.
Source unknown, lol
The adjustable centre differential is one of the toys upon the Type R which makes the car desirable amongst Impreza owners. The way it works is by an electronic clutch which engages fluid filled clutch plates and this acts unlike a limited slip differential and more like a mechanical device. In the open condition the Type R handles very like a rear wheel drive car. The differential transfers the torque front and back equally but when one end loses grip (usually the lighter rear end) all of the torque is transferred to the axle that is wheel spinning. An LSD would keep some torque going to the wheels still with grip. Thus the Type R can bite the unwary.
Moving the centre console switch one notch forward progressively locks the differential, and in the fully forward position the differention is completely locked. So why should you not have the diff. locked all the time? You are in effect forcing the drive on the front axle to be exactly the same as the rear. When going round a corner the wheels all rotate at different rates, the ones on the inside slower than the ones on the outside of the circular path. The front turning wheels travel at different rates to those on the rear fixed axle. Driving a Type R with the differential in the locked position on a good grippy surface will cause transmission damage, and the effects can be felt through the steering even when the diff. switch is set only one position forward.
So when should you move the switch? As stated the rear of the Type R can be very lively if you let it get away from you. On damp and wet roads this is more likely to happen, so transferring some of the torque forwards might be advisable. With the slippery conditions the speed difference of the wheels will be compensated for by the overall slip on the road surface. If the surface is gravel or snow then it is safe to move the diff. lock to fully closed, giving exceptional traction from both front and back, something an LSD would never be able to give.
Source: A Japanese book 'GC8 Bible' I scanned
Thumb clickable.
Source: Official or translated STI user manual, I'm not sure