Leonardo +5V Selector (USB) mosfet circuit question

On the Arduino 5V Micro schematic I was wondering what the purpose of the +5 Selector (USB) circuit is? I think it's something like when 9V or so is on the VIN pin, VUSB and +5V are shorted. What is this circuit needed or used for? +5V is always on VUSB when it's connected to a PC and +5V is created when VIN goes through the +5V regulator?

Yes it switches the power to the system from the regulator or the USB power input.
It does this automatically so tat if an external voltage input is attached it will use that.

Mike, could you please elaborate on this and maybe help me with the following?

Im powering barebone Atmega from 3.3V battery - before I connect the Arduino USB Serial Light adapter I need to disconnect the battery, connect the adapter, program the arduino and reverse the process.
Would the above schematics help me with auto selection of powering the device? That is - keep battery in, but still be able to program the device via the adapter?

Could you please be very verbose in your reply as I would really like to understand the solution.
Many thanks!

That is - keep battery in, but still be able to program the device via the adapter?

Basically what is happening here is that if Vin is at ground, that is there is no voltage applied to Vin, ( there is a 10K resistor elsewhere in the circuit connecting Vin to ground) . Then any voltage on Vusb will pass through to the +5V line.
If there is a voltage on Vin greater than 5V then it will stop the 5V from getting through the other way and powering the Vusb line.
If you look at the rest of the circuit in the Arduino Micro you will see that a voltage on Vusb will power the USB micro, so with this system that chip is not powered.
You need more than just this FET, there is another FET on the input to the voltage regulator. Look at the whole Arduino Micro schematic.

For your system perhaps the Leonardo power scheme might be better. Here a comparator sees if the Vin is greater than twice 3V3 and if so cuts out the power from the USB port into the voltage regulator. Attached is just that bit of the diagram.
Hope that helps

Mike, when the board is powered off USB, is the parasitic diode in T1 responsible for conducting the VUSB voltage to +5V? I cannot see how the +5V line is energised via the USB power input, other than through this diode..

Thanks in advance