My understanding is that the potentiometers have 4 possible connections.
1 - one end of resistor, connected to positive input voltage (+12V say)
2 - the wiper, connected to the power rail of the track slot (in a no-brakes track, these are the only ones connected)
3 - the other end of the resistor - 45 ohms (or whatever) away from +12 volts. If you pull the trigger a little, you reach this point, and if you hold the trigger here a long time, the controller will heat up at its fastest rate, since the max voltage is being converted to heat)
4 - the dead stop. It is needed so that the wiper is not resting on point 3 all the time! This is the brake connection. I guess it is connected to the other rail because as Nuro says, the result is to connect the two ends of the motor together so its back-emf will act as a power brake.
I think I have something wrong here, although a lot is right. The bit I cant figure is that the non power rail ought to be earth, but if so, in the braking position, the eartth would be connected to both ends of the motor and not allow back emf to brake. O well... nearly