AUTO – means that the fan only turns on when your system is heating or cooling air. Once the thermostat reaches the desired temperature, the blower fan will shut off until next cycle. ON – means that the blower fan is continuously running, circulating air even when your HVAC is no longer heating or cooling.
Should I use auto or circulate heat?
If you want to keep the energy bills low, you should set the thermostat to 'Auto'. However, if you prefer more even distribution of heat inside the house, it's better that you set the thermostat setting to 'On'.
Should I set my fan to circulate?
Keeping the fan on creates a more even distribution of heating and cooling, circulating the air if you have cold or hot spots in your house, like a bedroom above a garage. Less frequent starts and stops of the fan can reduce the stress from startup, and potentially help extend it's lifespan.