Locale Settings

found at admin/config/regional/settings in Drupal 7.

Default time zone

Sets the default time zone for the website. Think of this setting as the time zone where the organization is based. When anonymous users visit the site, time fields displayed for them will be converted to this time zone.

User-configurable time zones

Determines if individual users can set their own default time zone. When the user is logged on, this effectively over-rides the above "Default time zone" setting.

First day of week:

Sets the desired first day of week. Mostly affects calendar grid displays, but also affects date-browser output when viewing dates by week. For most US/english sites, this should be set to Sunday. Monday is also frequently used in countries that follow the ISO 8601 date standard. Also, Saturday is common among Gulf Cooperation Council countries. (see http://en.wikipedia.org/wiki/Seven-day_week#Week_numbering for details)

Use ISO-8601 week numbers

For USA/Canada/Australia as well as many Middle East countries, week numbers DO NOT follow the ISO-8601 standard, and this option should be unchecked (unchecked is the default behavior).
To fully comply with the ISO-8601 standard for date & time, this option should be checked & First day of week should be set to Monday. This is common for much of Europe & Asia.

Time Zone settings unique to each date field instance

found at /admin/structure/types/manage/[machine_name_of_node-type]/fields/[machine_name_of_field]

Time zone handling

There are 5 different options for field Time zone handling:

1. Site's time zone - When entering data into the field, the data entered is assumed to be in the site's time zone. When the data is saved to the database, it is converted to UTC. When retrieved from the database, the data is converted to the Site's time zone for anonymous users or the User's time zone for logged in users when User-configurable time zones is enabled.
2. Date's time zone - With this option enabled, the date field adds a select box to explicitly specify the time zone for the date entered. When the date is saved to the database, it is not converted it may (depending on module version) be converted to UTC or to the timezone configured for the user or site, & the time zone information is saved alongside the date. When retrieved from the database, the date is converted to the default timezone (whether that be set by the user or the site). [Unfortunately, this conversion is buggy, and rarely works correctly. See this issue.]
3. User's time zone - When entering data into the field, the data entered is assumed to be in the user's time zone. When the data is saved to the database, it is converted to UTC. When retrieved from the database, the data is converted to the Site's time zone for anonymous users or the User's time zone for logged in users when User-configurable time zones is enabled.
4. UTC - When entering data into the field, the data entered is assumed to be in UTC time zone. When the data is saved to the database, it is converted to UTC (e.g. no conversion necessary). When retrieved from the database, the data is converted to the Site's time zone for anonymous users or the User's time zone for logged in users when User-configurable time zones is enabled.
5. No time zone conversion - The date entered is not converted when saved to the database. When retrieved from the database, the data is NOT converted and is displayed exactly as entered. Useful in locales or situations where timezone conversions are not working reliably, for dates with no times, for historical dates where timezones are irrelevant, or anytime conversion is unnecessary or undesirable.