/prefetch:1 switch is basically snake oil as far as it supposedly making other applications faster to run.
What it is used for is when an application such as Windows Media Player have multiple modes that they can start up in then it is used so that their prefetch data is optimised for the particular mode that the application is starting up in. So if the applications is started with an equivalent of "/playdvd /prefetch:1" and it loads a particular set of Windows libraries then the Windows Prefetcher will generate a new profile for that particular instance of the application so that the prefetcher does not load libraries that the application was not going to ask for.
See Debunking yet another bogus Windows tip
The /prefetch:# flag is looked at by the OS when we create the process -- however, it has one (and only one) purpose. We add the passed number to the hash. Why? WMP is a multipurpose application and may do many different things. The DLLs and code that it touches will be very different when playing a WMV than when playing a DVD, or when ripping a CD, or when listening to a Shoutcast stream, or any of the other things that WMP can do. If we only had one hash for WMP, then the prefetch would only be correct for one such use. Having incorrect prefetch data would not be a fatal error -- it'd just load pages into memory that'd never get used, and then get swapped back out to disk as soon as possible. Still, it's counterproductive. By specifying a /prefetch:# flag with a different number for each "mode" that WMP can do, each mode gets its own separate hash file, and thus we properly prefetch.