Source : Free On-Line Dictionary of Computing

mode bit
     
        A {flag}, usually in hardware, that selects between two
        (usually quite different) modes of operation.  The
        connotations are different from {flag} bit in that mode bits
        are mainly written during a boot or set-up phase, are seldom
        explicitly read, and seldom change over the lifetime of an
        ordinary program.  The classic example was the
        EBCDIC-vs.-ASCII bit (#12) of the Program Status Word of the
        {IBM 360}.  Another was the bit on a PDP-12 that controlled
        whether it ran the PDP-8 or the LINC instruction set.
     
        [{Jargon File}]