It will transpose the notes chromatically by whatever interval you punch in. So if you have a sequence running C-E-G-A-F-D and then hit the E pad in transpose mode, that string will change to E-G-B-C#-A-F#. Transpose doesn't work like a composer manually transposing a piece while following the rules of musical composition. A simple note shift 'tis all it effects. Would have been more accurately named "Note Shift", but it's become a standard to call note shift transpose for a long, long time now. I used to think it was due to some electronic engineer naming it that in the 70's on his first sequencer when someone out of Pink Floyd asked him to make a transposable sequencer.
Setting the scale of a pattern will ensure that if you specifically programmed a particular (musical) scale mode and key, when you adjust that pattern using the knobs, it won't fall out of key. It won't ensure that the correct scale is kept intact when playing-in the note of a pattern using the pads or an external controller. Sorta useful, but also not really, as people who want to keep everything musically correct are generally practised musicians and will want to play those notes into the sequence, not set values with knobs.
If there was a way to change all the note values of a selected pattern, then proper musical transposition would be achievable in a single action.
Oh yeah, the top line of pads work in transpose just like when punching in notes to a sequence. All the black keys are available so you can get any interval shift you want.
