It's the "main switch". You should hot wire to the battery via this fuse. This will prevent you from upsetting the unit should you turn the battery off while the Webasto is still running. It goes through a shut down cycle when you turn it off at the rotary switch.
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I connected the heating to the fresh water circuit (just convenient) but that is fused on the heater side already so where should the red fuse go?
Basically give the Webasto it's own power supply via the supplied fuse. If you have it via a switch panel there is a danger that you will switch off the power to the Webasto while it is still running. It cools itself down for a while before switching itself off when you turn the rotary switch to the off position, but cannot do this if the power is cut off.
I think that you will find that two fuses are supplied. One for 12 volts, t'other for 24 volts. The manual shows the correct one to fit in the schematic diagram of the wiring harness. Only one fuse needs to be used.
CJ