The ECT button alters the transmission shift program. With ECT off, the tranny will upshift earlier and require a heavier push on the accelerator to downshift. The ECT button causes it to hold the lower gears longer and downshift more readily.
That said, the 3rd gen 4Runners had an ECT program that was pretty well emasculated compared to earlier model years. Our '88 Camry would upshift 1,000 rpm higher at WOT in ECT and downshift with the mildest prod on the accelerator. 3rd gen 'Runners have ECT programs that are much less aggressive.
Leaving ECT off will net you a tad better fuel mileage at the cost of driving a vehicle that can feel kind of sluggish. When I towed with my '98 Limited, I left the ECT off, so the tranny was less prone to downshift at highway speeds.
4th Gen 'Runners no longer have this button and don't need it. If I still had ECT, I'd leave it engaged around town and disengage it for highway driving. Truth be told, it isn't going to make all that much difference. And with all due respect to your uncle, it sure won't damage the tranny whether you have ECT engaged or not.
Best regards,