'Auto' attempts to use the image captured to determine what it would
look like under daylight conditions (as opposed to having a color shift
from the type of lighting or cloud conditions). Can be fooled if the
subject doesn't have enough true highlights in it, but for the most part
it's a good default setting. Auto also often allows you to aim the camera
at something you know is pure white and 'lock', telling the camera exactly
what white is. This is the most accurate method, provided you always lock
under the lighting conditions your subject is in.

       'Daylight' assumes that you're shooting in open daylight, and since
the goal of white balancing is to try and look like this anyway,
essentially it is "no adjustment" (though the capture device, and even the
lenses, may have a tendency to introduce color shift that has to be
compensated for).

       'Tungsten' is another word for 'incandescent', or standard filament
lighting. If shooting indoors under standard light bulbs, the image would
typically be pretty yellow, so this setting aims to balance against that,
essentially filtering the image towards blue (the opposite of yellow in the
color spectrum).

       'Fluorescent' is the counterpart to tungsten, and accounts for the
tendency of fluorescent bulbs to turn the image a sickly green - it filters
towards magenta.

       Now, here's the tricky part. Most flashes are color-balanced towards
'daylight' and need no white balancing. When used indoors under tungsten or
fluorescent lights, you're introducing two or more different color lights
and the camera cannot possibly compensate for all of them. Without white-
balance, your flash picture indoors might have your subject in reasonable
color, but the background (beyond the flash's reach and lit by the room
lighting) might be yellow or green. If you set white balance for the room
lighting, everything illuminated by the true white flash will be turned a
bit blue (tungsten) or magenta (fluorescent) by the camera's attempt to
compensate for the room lighting.

       Best solution - don't mix lighting wherever avoidable. Set your white
balance for the room lighting, or auto, and don't use flash.

       Hope this helps. Good luck!

    - Al.

in the days of film, it had to be made to the 'temperature's of the light,
daylight was 5500-6000' and tungsten was 3300-4000, oddly enough, the
tungsten was called warm and the daylight was thought of as cool.   That was
cause if you used daylight film with incandescent lights the photos would be
very orange color, and if you used tungsten balanced film outside you got a
very cool blue tone.

digital cameras can select lighting conditions, you can set it for your
daylight, and even adjust for florescent lights which usually gave a
greenish cast.

auto balance sucks, because your color balance will juggle around each frame
as the sensor 'sees' varying amounts of a color tone.

since this is posted in the 'people' group I will assume you are shooting
portraits, lets say you have a woman in a dress that has one panel magenta
and the other side is cyan, as she changes poses and the meter has the area
it is weighted for filled with more of one color than the other, the color
balance will shift wildly.

a lady that did digital retouching and preprint services for photogs was
being run ragged by one photog that was shooting portraits of all these real
estate agents, the color balance was wildly jumping around between shot to
shot, exposure too.  why? cause the sensor would see black suit, white
shirt, or the woman's red, blue, green, magenta, cyan suit or blouse.

So, its best to learn custom white balance, either off a gray card or use
one of those white caps, or just select one of the preset choices which will
get you close enough.

one more thing, learn to set your camera to your own standard set up before
you put it away.  IE, most of us shoot most things with daylight and low
ISO.  I think those are the standard defaults anyway, that way you won't
screw up a shot when you are hurrying to grab the camera, turn it on and
catch that rhino smashing the neighbors SUV, and geez, you forgot the last
time you shot your kid's school play and had it set for ISO 1,600 tungsten
indoor lighting.