To put it simply, any Heat Pump in cold climates (beneath 35 degrees) needs to be supplemented with a secondary heating source. Typically this is electric resistance at the indoor unit – but could include gas, oil or hot-water secondaries as well.
This supplementary heat is also referred to as back-up or second stage heating; whereas your Heat Pump alone would is called first stage heat. In the event of an emergency, you are able to employ only your supplemental heat (second stage), without using your heat pump (first stage).
There are distinct systems depending on the thermostats and systems which determine when the second stage heat come on to assist the first stage heat pump. This process is done automatically by your HVAC system.
During winter months, both stages work together; so it’s not mandatory for you to switch your thermostat setting into Emergency Heat mode.
In summary, Emergency Heat implies when a system is using supplemental heating by itself.