The breathing reality check works because when you control your breathing in a dream, you control the breathing of your actual body. Holding your breath in a dream means you hold your breath in reality.

A few reality checks work like this; by using elements of human physiology that are still relayed during dreaming. Quite a few reality checks however (such as the finger-through-palm one) work by expectation.

The light switch one is different; I've had a light switch fail despite me expecting it to work, and being extremely surprised when it didn't (though I easily changed the lighting level myself by thinking it, disproving yet another myth). I think it's been suggested that this is due to a part of the brain being deactivated during sleep.

The breathing test is ideal for a RC as it will always work as it's supposed to (unless you actually can't breathe but then you have bigger problems!).