There is an 11% drop in resolution when you use the default 16:9 aspect ratio vs going with a 4:3 aspect ratio (see article). I haven't been able to tell a difference in the pics I have compared between the two, except that at 16:9 takes a slightly closer shot. Perhaps 4:3 is better if you are going to crop and print to a 4x6 photo.
I generally leave mine on auto unless I know I'll be taking pictures in a certain setting. For example, if I'll be at an evening birthday, I'll set the camera accordingly.