First off, could someone just explain to me in simple terms whether or not I am allowed to have my book up for purchase on other E-Book stores whilst on KDP as I am not clear exactly what the laws are regarding this?
Also how do I know if someone has purchased my book will it tell me or is there a royalties counter somewhere that I am missing?
There is no single right answer for which is better. If you are in a genre like romance with voracious readers who enroll in K U for the borrows, you may be better in Select. I myself find that I get very few borrows compared to sales, so I've got my books on multiple platforms and earn maybe 20% of my royalties from non-Amazon venues.
Because Select enrollment is just for 90 days, you can experiment and see what's best for you.
For the five or six years I've been self-publishing, it seemed logical to me to have the widest distribution possible. Not every reader shops at Amazon, and the only way to reach those readers is to go to them. Every other retailer combined may represent only 20 or 30% of sales with the rest going to Amazon, but what sense does it make to turn down those 20 to 30% of sales?
In April, just to see how the other half lives, I enrolled one book, which had zero sales elsewhere, in Select. (I wasn't losing anything by pulling that book out of stagnant markets.) Now, a single day of KU reads for that one book (assuming .4 cents per page) earns more money than my entire backlist x every other retailer x all of 2015. Not that I expect that trend to hold perpetually, but even the suggestion of 365 x my entire backlist x my 2015 writing income is sufficiently motivating to warrant a change in principle. (This is just KU reads, mind you, not even addressing sales.)
In my case, I have seen the light (not the only light, but one that works better for me) and have begun removing all of my books elsewhere and going the exclusive route. It bothers me to lose access to those readers. It bothers me to have all my eggs in one basket. I don't fanatically endorse the arrangement the way some do because I'm aware of its shortcomings. When Amazon's terms change (they will eventually), if those changes aren't as beneficial to me, I'll consider the alternatives available at that time. But for now, I can't argue with the spreadsheets.
I avoid Select for two reasons. First, it cheapens the book because it shows on the Amazon store as zero price. My Guide for example is priced at $3.99, which might cause some resentment if the prospective buyer sees that others are getting it for nothing. And if someone does borrow it and reads all of it, I earn about 35 cents instead of the $2.50 I get from a sale.
Second, not everyone favors Amazon and the Kindle format, especially in other countries. Outside of the US and the UK and Australia, your book becomes pretty much invisible because epub format is favored in most countries of the world. Even in the United States, there are many people who prefer Barnes & Noble, either because they long ago purchased the Nook instead of a Kindle, or they believe that Amazon throws its weight around.
(And third, even if neither of the above should apply, I would still go for wider distribution because I agree that Amazon DOES throw its weight around.)
If it's your first book, my advise would be to put it in select, but for only 3 months. Then you can distribute it everywhere. By that time you might have another book and you can do the same thing again. I think this is a good way to launch your career.