the "permanently switch on / off" seem to be a normally close or normally open alarm signal.
Any alarm signal is usually set to be normally open (permanently switch without alarm). so the contact is kept closed, and opens in an alarm state. that's the safest way to do it because if your cable gets damaged, the alarm will be triggered too, making you aware something is not normal (no alarm raised ? then must be a cable fault).
An alarm circuit that is normally closed (permanently switch on alarm) is less safe, because if your wiring is broken, no potential alarm can be sent and you won't know it.
Depending on what you try to control, some will take only NO or NC alarm contacts and some will be able to take either of these
Yes that practice is called "Fail Safe" In my day job we have to interface to building fire alarm systems. Sometimes it's dry contact and sometimes it's 24VDC. We always use contact closed or 24VDC present for NOT Alarm and contact open or no 24VDC for Alarm. This ensures that if the control interface fails (wire broken, wire disconnected, 24VDC power supply fails, etc) that the failure results in Alarm. This prevents a latent failure from not being detected. Fail Safe is required for Life Safety control logic,
The name of the third button still confuses me. The output has to change state based on the Alarm condition or some other parameter. I think you are right that if the last 2 buttons are selected, the output still changes state based on the Alarm condition. I just need to connect an Alarm cable to my High Flow Next and put a meter on it to be sure. I have the cable but have not gotten around to doing it yet. When I do, I will post my findings in case anyone else cares.