Great article by James Duncan Davidson on color temperature. (update: sadly, this article is no longer available on his site, or anywhere else I can find either.)
If this setting is way off–say you shoot outdoors with your camera set to a tungsten color temperature setting–your images will have a massive color shift to them and appear ultra-blue toned. Vice versa, if you shoot indoors at night on fully automatic mode and your camera doesn’t dial in a correct color temperature, which happens more often than we’d like, everything will appear orange-tinted.
I’ve been working on a photography-related post that touches on color temperature without going into much detail (in short, if your digital camera supports raw format, your color temperature setting is less important than you may think). If you want to know more, go read.
(Via Daring Fireball.)