Canon's auto depth of field (A-DEP) feature works by (1) finding the nearest and furthest of all the autofocus points, (2) setting the camera's focusing distance to optimally position the depth of field between these nearest and furthest points, and (3) setting the aperture so that the edges of the
depth of field extend far enough to contain these nearest and furthest points.
sample autofocus point array for the Canon EOS 40D
The auto depth of field feature is most useful for group photos where you would want everyone in sharp focus, but do not necessarily want to use such a small aperture that it causes the background to become sharp. On the other hand, A-DEP's biggest problem is that it uses all of the
camera's autofocus points-- which are quite often uncontrollably placed across the your subject and background. It is primarily for this reason that many photographer's complain about A-DEP or never use the feature at all.
Using A-DEP is different from
setting the camera/lens to the hyperfocal distance because the furthest edge of the depth of field does not necessarily extend all the way to infinity (as would be the case in a landscape shot, for example). Often times the hyperfocal distance is not ideal for situations with primarily foreground subject matter or indoors, which is where A-DEP happens to prove most useful. A-DEP is really a custom hyperfocal distance for a given set of near/far subject distances.
It is also worth mentioning that ever since the Canon EOS 1D, Canon has dropped the A-DEP feature from it's professional 1-series cameras.