Right. If you have the setting at a pretty high part, the iPad will never go darker than where you set it. If you put it at 100%, it will always be at 100% regardless if you have Auto turned on or off.
I basically took it into my bedroom with all the lights off and found a good level that worked well in absolute darkness and set the level there and then turned on Auto. Now if I go outside, it will go as high as it thinks it should to allow me to see it and then when I go back into a low light area, it will go as low as I set it.
Hope that makes more sense.