Rizwan: A good resource for sorting out how Kato turnouts work electrically is Alan Gartner's http://www.wiringfordcc.com/switches_kato.htm. The discussion is around a turnout being "DCC friendly" (point rails same polarity as the nearby fixed rail to reduce chance of a wheel flange creating a short as it passes between them) which for Kato turnouts gets you into the issue of "power routing" (power follows turnout position) which is what the internal switch does (the switch also powers the frog as the switch pivot is in fact a threaded bolt that screws into the frog directly above it.) But be aware of the following from Allan's description:
QUOTE
Kato Unitrack #6 HO, #4 N.
Note: You are reading this correctly. It is not a typo. The #6 HO is like the #4 N. Furthermore, the #4 HO is like the #6 N!
This turnout is DCC friendly.
The N #4 Kato power routing screws on the bottom of the turnout are mislabeled. See this posting on the Kato website: .?
END QUOTE
As Nigel and Jim have said, the decoder needs to be connected so that it is powered regardless of turnout position, whether it's "power routing" or not ("not" is usual for DCC systems) and regardless of whether its power routing option setting screws are mislabelled.
Jan
