Posted By QShot:
I sounds like the camera tries to deliberately under expose by a small amount (low/normal/high) with the intention of not blowing the highlights then some how plays with curves (or levels) internally prior to saving the file. Would you say that is about right ? Is it reasonable to assume that this is about the same as could be done in photoshop later, or do you think the camera does a better job of controlling the noise in the shadows?
No, that isn't right. What Active D Lighting does cannot be duplicated in Photoshop. In fact, it cannot be duplicated in Capture NX. The D300 and the D3 are both equipped with ADL, but it seems to function a lot better in the D3, probably due to the larger photosites on the sensor and more data to work with.
ADL is applied in-camera to the sensor data as it is recorded. DL as a step in Capture NX is applied after the fact and can be approximated in PS, but only matched using a more time and effort. PS cannot apply anything like ADL because it cannot render the sensor data.
ADL is useful in high contrast situations. Full sun - dark shadows is an easy example. If you want to use ADL, it has to be turned on in the camera menu. It can be turned off in Capture NX, or adjusted between low-medium-high. I think it works extremely well when using Capture NX for rendering and processing NEF images.
The catch is this: If you turn ADL on in the camera, it will be applied to the sensor data as it is stored. That means that the effect will also be present if another RAW converter like ACR is used rather than CNX. However, it is only CNX that gives the user the alternative to change the amount or remove it. Use it with care.