The camera always focuses on an invisible object that's "tethered" to it. When you move the camera with the middle mouse button, it's that object you're moving, and the camera goes with it. When you use the right mouse button, the camera orbits around that object.
When Auto Center is turned on, the object moves itself to a point on the characters.
The reason zooming can be difficult when Auto Center is turned off is that the object is being moved around the screen and when you zoom in, the camera zooms in to that object. Since you can't see the object, it can be difficult to figure out where you're zooming. It takes some practice to get right, but once you wrap your brain around it, turning off Auto Centering can help you get the best camera angles.
I'll be making some changes to the camera in future updates to make it more intuitive.