Side-by-side isn't really that confusing. It allows each app to pick the version of a DLL that it needs to use. There are a bunch of SimConnect versions out there, because of the various versions of FSX and also P3D. There are even beta and hacked versions of SimConnect.DLL floating around the Internet. When you install any app that uses SimConnect it checks to see whether that app's version is already installed by perusing:
C:\Windows\WinSxS\
There you will find a bunch folders named like this:
x86_microsoft.flightsimulator.simconnect_67c7c14424d61b5b_10.0.60905.0_none_dd92b94d8a196297
The SimConnect.dll file version 10.0.60905.0 will be found in this folder.
The manifest file for each app will tell the app which version to use. For example, the manifest file for TrackIR when running with FSX SP2 looks like this:
<?xml version='1.0' encoding='UTF-8' standalone='yes'?>
<assembly xmlns='urn:schemas-microsoft-com:asm.v1' manifestVersion='1.0'>
<dependency>
<dependentAssembly>
<assemblyIdentity type='win32' name='Microsoft.FlightSimulator.SimConnect' version='10.0.61259.0' processorArchitecture='x86' publicKeyToken='67c7c14424d61b5b' />
</dependentAssembly>
</dependency>
...
</assembly>
which shows you that if you are running FSX SP2, then TrackIR will use the unique SimConnect version 10.0.61259.0.
None of this really has anything to do with SimConnect itself, but rather explains how Windows allows multiple versions of a DLL to coexist. When an app has more than one manifest file, then it generally calls another DLL first which then determines what sim is running and then the "helper" DLL decides both the proper manifest file and version of SimConnect.DLL.