Direct means that the phono preamp will bypass tone controls and other circuits for a cleaner sound.
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I have this preamp. Mine is in intermittent working condition.
The MM input is for Moving Magnet phono cartridge.
The MC " " " " Coil " "
Direct phono does bypass the parametric equalizer tone controls. It turns them off. You can turn them back on by pressing "direct phono" so the light go out.