Automatic transfer switch senses utility power. After sensing 5 seconds of no utility, the generator engine will start. Once the engine is up to speed and creating power, the transfer switch will automatically transfer from utility power to generator power so now the generator is the power source. Once utility is restored, the transfer switch will sense utility being restored for 20 seconds before automatically transferring back to utility.
A manual transfer switch is 100% manually operated. If you are not present or able to operate the switch, no backup power will function.
Home standby units are built and designed to work with an automatic transfer switch. They are not designed to be connected to a manual transfer switch. Trying to connect a standby generator to a manual transfer voids the warranty and is very problematic. All standby units have controllers that always need power to run properly. Without these connections, the unit will burn through batteries, not exercise the engine properly, and cause premature failures in the major components. THIS DOES NOT SAVE MONEY!
For more info please refer to these specs from OPPD. https://www.oppd.com/media/76706/meter-manual-chapter-11-customer-standby-generation-installs.pdf