The Ambient Light Settings controls the amount of light that hits the objects from all directions. It is similar to the kind of light you have when you have a cloudy day. In other words, there is no single point where the light comes from and all sides of an objects are equally illuminated.
Since it comes from all directions, it will be noticeable in places where there is no direct light. As a result, it tends to control the contrast of the objects. The more ambient light, the less pronounced the shadows will be.
