The valve has a "cam" beneath/attached to the selector. When in "Both" position, each tank will supply fuel to the gascolator-side of the valve, as that cam opens a ball-type check-valve. There is nothing to prevent fuel from backflowing up into a tank except the weight of existing fuel within the tank. Long term storage of the airplane with the valve in the "Both" position may allow some fuel to transfer S-L-O-W-L-Y between tanks ("equalize" as you wrote). But it is unnoticeable in most cases because, again, of the weight of existing fuel.
The Cessna fuel system design has undergone several changes over the years. The "gooseneck" prevents one tank from overflowing the other tank due to "equalizing" because the gooseneck is higher on the airframe. When Cessna changed to a lower fuel vent beneath the left wing, they had to install a check-valve to prevent fuel from overflowing onto the ramp. (Failed check-valves allowed the problem anyway,...along with other occasional problems regarding vent-pressure and anti-icing placement behind the left wing-strut, ...and rubber bladders contributed even more problems with that issue even when the valve was turned "Off".... as the bladder collapsed due to failed venting it might actually reverse-flow fuel out the vent....but that's another discussion, not applicable to 170's.)
If you are leaving your selector on "Both" while in storage, a failed valve...or more likely...a stuck carb float-valve....can let your tanks empty onto the hangar-floor. (I hope your insurance company will protect you adequately from any claims by other hangar occupants and owner if/when the fire breaks out. And that no one is hurt.)
Some folks are reluctant to close the valve to the "off" position because they fear "unnecessary" valve wear. The machined-body valve used on SN's above 20285 (and perhaps retro-fitted to others) is not harmed by use, in my opinion. In fact, the valve should be turned "Off" during storage to prevent mishaps, as well as to confirm the valve operates properly to shut-off fuel in case that is ever needed due to an engine fire or failure of the fuel-system downstream of the valve. (I have witnessed several events where the pilot/owner valiantly and frantically attempted to stop a fuel-overflow onto the ramp/ground due to such failure. Rapid access to the failure area (the carburetor) is not easy with the cowl in-place. If this happens to you... you will have a serious hazard of fire and can lose the airplane if not life itself. The pouring-fuel rapidly runs down the pilot's arms and soaks his clothing, not to mention the rapidly-enlarging puddle of gasoline in which he's kneeling.)
Closing the valve during storage also re-spreads lubricant and excersizes the components, which I feel are good for them. "Use it or Lose it", IMO.
I posted a copy of the article I authored in this thread which (article begins down-the-page) and includes pics:
http://cessna170.org/forums/viewtopic.p ... e&start=45
A more direct link is:
http://cessna170.org/forums/viewtopic.p ... hem#p72283
(The article also appeared in The 170 News, 1st Qtr 2011) for those who keep them.