Tow haul changes the transmission shift patterns slightly to help when the coach is heavily loaded or when ever you want to use it towing or not. It does not restrict a gear such as OD on/off. When in Tow/Haul and accelerating moderately hard, such as a freeway on ramp, the transmission will hold a gear a bit longer before upshifting to get every bit of power available to get you up to speed as quickly as possible. Floor the accelerator and you'll probably get the same effect. The cost is a bit more engine noise with the higher RPM, more fuel consumed and maybe a slightly higher shock when the shift does occur.
Slowing down is when you'll really feel the change. The transmission will get a bit aggressive dropping into ever lower gears as you slow down naturally or when using the brake. The torque converter will also stay in lock up much longer also. The goal is to help slow the coach down with less use of the brakes. Somewhat like using the shifter to force the transmission into a lower gear sooner.
When to use is up to you. Always? Never? Only when towing? Only on hills? There really isn't a right or a wrong answer. There are a couple of short paragraphs in the owner's manual that describes the feature also.