The B on the 1-2-B switch was originally used when the AO went to the C post of the switch, so both banks could be charged when running the engine. When the engine was shut off, the switch should have been moved to the house bank. In "ye olden daze" the general design was to have two equal house banks, and switch daily. with the growth of electrical-hungry accessories on boats, the preferred method is to have as large a house bank as possible to support said loads, with a separate reserve bank. Some folks prefer to have a separate start bank so they don't drop anything that's connected to the house bank, like electronics, out when their engine starts.
The AO now is recommended to go directly to the house bank, NOT the switch. This avoids damaging the alternator diodes if the switch is touched during engine run.
The house bank is connected to the reserve bank with a separate relay of some sort, like an echo charger, combiner, oil pressure switch. The simplicity afforded is easy: get on boat, turn to house bank, use your boat, turn off at end of day.
The ONLY time B would ever be used is when the engine is running and the relay fails. It's a backup, B for backup.
The significant advantage of the 1-2-B switch over the dual circuit switch is two fold: one, since you're smart, you don't put it on B when the originally selected battery doesn't start your engine, you switch to the other battery (the dual circuit switch simply cannot do this, it combines them at the worst possible time!); two, you can actually use the reserve bank to run your house loads, albeit limited because of the smaller ah capacity of the reserve bank.
1-2-B is useful but the archaic system.
That's simply not true. The switch was (incorrectly) wired for convenience of the builders by combining the starter feed with the AO wire to the C post. Besides, the switch is not a system. An understanding of the proper application of the 1-2-B switch and electrical systems will show that the dual circuit switch has a an illogical position when used in real life - combining batteries as Blue Seas discusses in their literature for that switch will only hurt the folks it's meant to help. The only advantage that switch has is to separate the house and start functions, but many of us do not have issues with the 1-2-B switch, nor electrical items "dropping out" as Maine Sail has repeatedly mentioned.
Much of this, like all of it, is covered in the links I provided.
Here's a good summary from that link, with other links for you to read:
http://c34.org/bbs/index.php/topic,5977.msg38552.html#msg38552
As always, your boat, your choice.