- If Auctioneer says "Undercutting by 5%" you generally will have an acceptable price for the item that will sell. This is a pretty safe bet situation.
- If it says, "competition is below market value", people are trying to sell items for too little. This is a bad situation. You might consider waiting for another day to sell, or buy the under priced items. This is risky. Generally I just wait out the low price trend.
- If it says, "competition is above market value" you are in the best situation. In this case it will be very easy to under cut other auctions and still make a killing. If you price too high and yet still undercut, no one may buy. If you sell too low you might not make as much money as you could. Experience will guide you here. You could just leave the price Auctioneer picks if you are uncertain. Personally I would recommend bumping up Auctioneer's price a little. Then again it is just a game why not take a risk! Get rich!
One last point. From time to time you will find that there are 1 or 2 items that are under priced compared to the bulk of the auctions. In a situation like this you may want to simply buy the low priced items, so you can put your items up for a price you would prefer. While you are at it, put the lower priced ones you just bought up at the price you want too 
More on this method in the next section, Market Manipulation.
There are the basics. As you get to know the items in game and on the AH you will get better and better at doing this. You can make a LOT of money very quickly with this method.
