Using x-ray absorption spectroscopy at the Ru-L2,3 edge we reveal that the Ru4+ ions remain in the S=1 spin state across the rare 4d-orbital ordering transition and spin-gap formation. We find using local spin density approximation + Hubbard U band structure calculations that the crystal fields in the low-temperature phase are not strong enough to stabilize the S=0 state. Instead, we identify a distinct orbital ordering with a significant anisotropy of the antiferromagnetic exchange couplings. We conclude that La4Ru2O10 appears to be a novel material in which the orbital physics drives the formation of spin-singlet dimers in a quasi-two-dimensional S=1 system.