Hello,
I've searched about this and found this page:
"Welcome to The Metaverse : Vista power management & CPU frequency"
In short, Vista is able to vary the processor clock frequency (from 0 Hz to 2.4 GHz, if your maximum processor speed is 2.4 GHz) according to the processor usage. Minimum and maximum processor state control the range within which Vista varies the clock speed.
For example, a minimum of 25% and a maximum of 75% will make Vista vary the speed between 600 MHz (25%) and 1.8 MHz (75%) for a 2.4 MHz processor. "On battery" and "plugged in" is for setting two different ranges for the charging and discharging states.
The point of reducing clock frequency is that, the higher the frequency, the more heat the processor will produce, and the more power it will consume. The lower the frequency, the more time it will take to complete a processing (calculation).
More detailed information with pictures can be found in the link given above.
Hope this helps,
~ADTC