What exactly does Adobe Switchboard do?

Solution 1:

Adobe Switchboard was an experimental Adobe technology which allowed Adobe AIR apps to control CS5 applications. According to John Nack's blog

SwitchBoard is a Flex library that allows you to extend an AIR app by giving you access to the ExtendScript DOMs for the Creative Suite apps. Your AIR app can now easily establish two-way communication with Photoshop, Illustrator, InDesign and Bridge.

However, Adobe Switchboard was discontinued and is no longer relevant:

Adobe will not be directly delivering a replacement technology in CS5, but we will use what we have learned to add more capability to the Adobe Creative Suite SDK in the future. Adobe does not support the use of the SwitchBoard technology in CS5. The SwitchBoard technology was removed on April 30, 2010 and is no longer hosted on Labs.

Most likely, you can disable and remove that service. I do not believe it will break anything if you remove it, but keep a backup just in case.