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Your eye has an incredible ability to see in low light. This means that you can very often see details in shadow areas with your naked eye while your camera will render those same areas as black and featureless. The Auto Lighting Optimizer applies post -processing to your image in camera to brighten shadow areas in your image. Note that it doesn't just brighten the blacks. It actually figures out where the shadowy areas are in your scene and it brightens those without washing out all of the blacks in your picture. By default, the Auto Lighting Optimizer is on.
This is the icon for it right here. And notice that little bar chart there, those three bars, that's to indicate that we're currently on the middle setting. If we go into the menu, to the second shooting menu, and down to Auto Lighting Optimizer, we can see that there are three settings and an OFF position. We are in the Standard setting which is applying a certain amount of correction. I can if I want to go to Lower setting less correction, or Stronger setting which is going to be more correction, or I can turn it off altogether. Now, why would I want to manipulate this at all? Well, a lot of times you may find that it's brightening up the shadows more than you would like.
Maybe you've shot with the idea that I really want this to be a deep dark shadow and now you're seeing details in it. In that case, you may want to try turning Auto Lighting Optimizer off altogether. Or, maybe you like it getting a little darker but don't want to see as many details you could lower it. There might be other times where you're having trouble getting detail in the shadows in the way that you want, so you might turn it up to Strong. This is one that you really need to do some experimenting with. Go out and take the same shot with all four of these settings and go back and look at your scene and see how they differ and start to get a feel for what the Auto Lighting Optimizer does.
Note that this is only going to impact your JPEG images. RAW files of course are not processed in the camera. However, if you're using Canon's image processing software DPP, any images you shoot with the Auto Lighting Optimizer will be tagged as such. And when they get into DPP, it will automatically apply these same corrections.
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