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think about it, you want the bottom of the piston to be in that intake hose so that it releases whatever boost "builds up in the valve" smoothly, if you had the bottom of the piston on the boost end of things, then the boost pressure would push the valve open prematurely...

Do these valves go bad and need to be checked. If yes how? and what is the little vaccum line?

So the function of the valve is to release built up boost pressure (before the intercooler) back into the turbo intake (to prevent too much pressure building up in the system between shifts)...another way of putting this is that it recycles the air generated by the turbo. Since the boost pressure is buidling up on the side of the valve (which is what you want), when you go to shift, the vacuum line allows for the piston to move up in the valve and thus create and opening for that pressure to escape to (i.e. back into the intake). I hope that helps in your understanding...if anyone has a better way to put that, please feel free to add...