White Balance is the camera setting that adjusts how colors are rendered in an image. A white balance setting has a numerical value, (Kelvin temperature) however more commonly white balance presets are used which denote their ideal lighting, such as daylight, cloudy, flash, or various indoor lighting scenarios. Setting the "correct" white balance setting results in the color of light appearing as close to neutral (white / grey in color) as possible.
White Balance Technical Explanation
After the exposure triangle, (shutter speed, aperture, and ISO) a photographer's choice of white balance is the fourth most important camera setting that must be decided. White balance significantly influences the look of any image, by designating, "what color should appear white" in a photograph. That is, for example, if a photo is captured outdoors in broad daylight, and the white balance is set to daylight, a picture of a grey or white subject would be "correctly" rendered grey or white.
See also, Color Temperature.
White balance is composed of one primary parameter, on a scale from "warm" to "cool". However this scale, which could approximately includes red, orange, yellow, and blue, does not take into account other common colors that occur in ambient conditions, especially man-made lighting, such as yellow-green, magenta, and others.
Thankfully, on most cameras (and in all raw editing software) white balance also offers a secondary parameter which can correct for any color hues of green or magenta. This secondary tint (compared to temp) setting is surprisingly useful in everyday photography; for example sunlight that is filtered through the green leaves of a tree would cause the light itself to turn yellow-green, and to correct this a camera's WB tint would be dialed in the magenta direction.
White Balance and RAW Editing
If a camera is set to record JPG or TIF images, then the white balance value is fixed or "cooked into" the image, at whatever value the photographer sets at the time of capture. However, unlike the settings of the exposure triangle, if a camera is set to record RAW image files, the white balance can be re-set in post-production without any negative or destructive effect whatsoever on the image quality. This is because a raw file retains the full range of color data captured.
Creative White Balance Color Settings
One of the first keys to understanding balance, however, is that it is not merely a correction, but also a creative tool. Similar to overexposure and under-exposure, which create high key and low key images, respectively, white balance can be adjusted in a creative direction to intentionally cause either a warm or cool effect.