That's a PASS-THROUGH inverter. When you have SP or generator power 120 VAC is passed through from the plug in to the circuits downstream. When you don't have external 120 VAC the inverter takes the 12 VDC from the batteries and inverts it to 120 VAC to power the downstream circuits.
I don't see the battery connection wires in your pic.
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Ted & Melinda
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