The shifter is controlled by the two wires S1 and S2. These form a binary number between 0 and 3. Here is what they tell the shifter to put on its output wires.

S1 S2
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0  0     do nothing           pass input to output unchanged
0  1     right shift 1 bit    logical shift only
1  0     left shift 1 bit     logical shift only
1  1     unused