Thermostats are designed to change electrical states when the set point is reached: The upper thermostat should remove power to the uppper element and transfer it to the lower thermostat and the lower thermostat should open and remove power to the lower element. If either fails to switch, the water will continue to heat. The red button is a thermal bimetal disc which “pops” and opens both legs of the circuit to positively interrupt power if the water continues to heat above the thermostat setpoints.
The thermostats only open one leg of power. If an element develops a conductive path to the water, the water will continue to heat slowly even if the thermostats are operating properly. The thermal is designed to interrupt power due to this failure as well. Check under Tanklets for checking thermostats and elements. Electrical safety rule: if you don’t have to have power for diagnosis, TURN IT OFF!