You can record environmental sounds by pressing button 1 (it arms recording) and then long pressing START (it starts recording). Line input works too, activated by button 2 instead.
You do not need to use the stylus to activate this function. The recorded material is stored on the SD card, in the same directory as when using the command RS.
This video was created by replacing the mobile phone audio with wav files from the Loopstyler.
Find more info at: http://phonicbloom.com/
The detailed owner's manual is here: https://phonicbloom.com/loopstyler/manual/