An example might help. Let's consider a €100 each way double with one winner and one placed horse, both priced at 16/1 with place terms of 1/4 odds.
The each way (default) method would return €2,500 - win and place elements are two separate doubles. The win double loses so returns €0 and the place double wins - winnings from the first placed horse, €500 (€100@4/1), goes on to the second giving the return (€500 @ 4/1).
The each way all each way method (must be written on docket) would return €5,500 - after each leg (race) any returns are divided equally as an each way bet on the next leg. So, if the first horse is placed the win portion of that leg has lost but the place portion returns €500 (€100 @ 4/1) which is divided equally on the second horse i.e. €250 EW. Hence, if the second horse wins the win portion returns €4,250 (€250 @ 16/1) and the place portion returns €1,250 (€250 @ 4/1) giving a total return of €5,500.
If both horses were placed the return would be the same using the normal "each way" method i.e. €2,500 but would be lower using the "each way all each way" method i.e. €1,250 (€250 @ 4/1).