This is significant in that the Mego Fist Fighter are souped up Type 2's. As you can see from the illustration above the torso is essentially the same, but the hip unit attaches to the torso via an axle that is connected to the switch in the waist. The armholes are tooled out to accommodate freedom of movement.

The switch twists the axle which is connected to the arms in a ball-and-socket assembly that enables the arms to swing back and forth in a counter-motion to each other creating the left-right-left fighting action. The twisting of the torso enhances the illusion.

These instructions from the back of the British Palitoy card courtesy BRaIn Heiler also describes that when the left arm is pulled out it disables the arm and the right one throws an up and down Karate-Chop. Does it work? Pretty much. Things tend to turn into a slap fight after awhile, but a little practice helps. The clothes do tend to get in the way.