The following information is taken from the 3rd Generation iPad user's guide:
The iPad’s Side Switch—located on the right side of the tablet near the top—can be set to lock the screen orientation or to act as a mute switch, depending on your preference. To set this, go to Settings -> General, and then tap Lock Rotation or Mute in the Use Side Switch To section. If you choose Lock Rotation, toggle the screen-rotation switch on the side of the iPad to expose the orange dot, and your iPad stays in either landscape or portrait view, regardless of how you’re handling it. When the rotation lock is engaged, a small icon showing a lock with an arrow around it appears on the right side of the status bar near the battery icon. If you select Mute in the settings screen, the switch controls the iPad’s Silent mode, which mutes alert noises. Note that you can still hear the audio in music and videos from the device’s speaker when the iPad is in Silent mode.