The dials adjust the horizontal and vertical alignment. Many games on the Apple II didn't know how to auto-calibrate the joystick, so you have to do it manually. On my normal joysticks, there're 2 plastic nobs that you rotate. On these, they're really nice metal dials.

The LEDs indicate which button has auto-fire turned on. If you look closely, you'll see that below the LEDs are 2 toggle switches.