toggle on back of my imac keyboard, what does it do?

If it's the Bluetooth keyboard, you can turn it off, so the battery will last longer if you aren't going to use it for a while. The green dot showing means the switch is on.

Also, turning it off then on can help in pairing it to a computer that doesn't have the latest softwafe or Bluetooth hardware.

FWIW, there are no Apple USB keyboards with a toggle switch. New Magic Keyboards come with a USB to Lightning cable so you can charge the keyboard's rechargeable battery. Malcolm is correct, the toggle switch is to turn the keyboard on or off when used without the cable.