The Artist and Album Artist fields are simply tags that come directly from the media files that you have got (in most cases) or that you have filled in manually in MC. But you are correct in your description of Artist, this is how it's meant to work, although it is really up to each individual person as to what they put into these fields.
Artist = Track Artist
Album Artist = Album Artist
Therefore you can create views according to how you want to browse your collection. The major difference, as you have spotted, is that the track artist can be different from the album artist. So when you browse a list of artists, do you want to see all obscure artists that have had a track on a compilation album somewhere, or do you only want to see artists for which you've got entire albums for? If the former, use Artist in your views. If the latter, use Album Artist instead and populate it with "Various Artists" in it for compilation albums, and therefore you can exclude "Various Artists" from your artist view and then create a separate view that shows compilation albums only, if you want, or alternatively you can leave "Various Artists" in your artist view and is where you will magically find all your compilation albums!
Album Artist (auto) is a field that MC provides automatically, you don't have to populate it. It simply mimics the behaviour of Album Artist as I've described above so that you don't actually have to consider populating the Album Artist field yourself. It will intelligently look through all the Artists in an album and if they're all the same then it puts the Artist into Album Artist (auto). However, if they are not all the same then it puts "(Multiple Artists)" into the Album Artist field instead. So yes, you can see that in some situations, the Album Artist (auto) field will be the same as the proper Album Artist field if you've populated it, and I guess these will be the situations when all the tracks on the album are by the same artist.
For more explanation of Album Artist (auto), see the documentation at
http://wiki.jriver.com/index.php/Album_Artist_and_Album_Artist_%28Auto%29.
