Maybe this will help Tom.
Look at the hose marked "Cold water" at the bottom of the picture. You will se a "t" in it. This "T" feeds the bypass valve with cold water (or campground) water.
In the normal mode, all the water does is go up to the valve and is redirected to the water heater inlet side. This is the lower hose on the back of the water heater. Even though I have replumbed my basement, this is all original from the factory.
When you place the valve in bypass mode the water is diverted through the hose marked "BYpass mode"
You can see that hose runs directly to the hot water manifold. This is the way you can supply water to the hot water faucets even in bypass mode. All it does is eliminates the water going to the heater.
As you can see, without the check valve, or as Ken uses a gate valve or ball valve, you could not eliminate water going to the water heater. Without the check valve or gate valve, water would try to enter the water heater through the outlet side canceling the "bypass mode"
The check valve position is marked on the top of the water heater.
(After you open up the picture , click on the picture to maginify it so you can see better. I am not the sharpest tool in the shed when it comes to computers, this was the best I could do.)