I'm not sure exactly how this applies specifically in a car, but on a home heating and cooling (air conditioning) thermostat, it is often associated with the fan or blower setting.
If for a system fan:
"Auto On" setting in a heating / cooling system would start the fan when the temperature climbed above or dropped below the setting you on the thermostat and start the heat or cooling source. Once the thermometer indicates the desired temperature had been reached, the heating / cooling source would be stopped and the fan would turn off.
"On" would run the fan all the time, regardless if the thermostat tired to start the heat or cooling source. This would result in constant circulation of the air in the space(s) and tend to keep warm or cool spots (rooms) from being created.
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