The palette shows the four folks currently assigned to the 
, 
, 
and 
buttons corresponding to the four circles in the top-right of the screen.
If you would like to use the folk in the circle at the top, simply press or hold the buttton to attack or guard. Note that this will only work if you have enough MC to attack with.
Folks can be added or removed from the palette by pressing 
to open the Change Folks Screen. On this screen, simply scroll left, right, up or down then press one of the , , or buttons on the folk you want, press again to close the screen.