Ah the rear-view mirror... such an unassuming but useful object.
I have recently been using the night position a lot, due to the fact that I am driving on sparsely travelled roads in the middle of the Kern County oilfields. We usually travel slower than many cars on the road because our truck (the "logger" not the pickup) is large and sometimes a bit unwieldy. I drive behind the logger in my pickup. This means that people end up following me way too closely on the two-lane roads before getting the opportunity to pass! So at night, flipping the rear-view mirror really comes in handy when these bright lights are right behind me.
I used not to understand how this worked, but it is a simple principle. The mirror has two layers. The outer layer is mostly transparent but partially reflective. The inner layer is reflective and is pointed toward your eyes in the day position. In the bright light of the day, it reflects like a normal mirror, because the outer layer lets most of the light through. The outer layer is set at an angle to the inner layer, the same angle that the mirror rotates when you flip it. In the night position, the light from the car behind you gets mostly transmitted through the outer layer to the inner layer and is reflected away from you toward the ceiling. But because the outer layer is slightly reflective, it reflects just a little of the light back to your eyes, making it much easier to see in front of you but still keep tabs on what's behind you.
If you flip the mirror during the day, you'll notice that all you get is a reflection of the ceiling. This reflection is so bright that it obscures any dimmer reflection coming from the outer layer.
This is the same principle used for two-way mirrors. The two-way mirror both transmits and reflects light. The room on one side is kept very bright, so the people in this room only see the light being reflected from the mirror, which obscures anything being transmitted from the other side. The other side is kept dark so that the people on this side can see the light being transmitted through the mirror without it being obscured by any reflections.
So next time you're driving at night, take a second to appreciate your rear-view mirror!