Tuning
Tuning can get you closer to a car that handles the way you like it, but it's also somewhat easy to screw things up if you don't know what you're doing. (You can always revert to the initial settings for your car, though, in case you happen to, say, entirely cut out the brakes.)
Tires
The main tire setting is pressure. You can increase the pressure here if you want more control in turns, but you overdoing this will result in more sudden slips when the tires suddenly lose their grip. Less pressure will increase grip by allowing more of the tire to contact the road, but the side effect of this is that you'll take slightly longer to turn off the forward axis.
Gearing
Properly tuning gearing ratios is one of the black arts of car adjustment; it can be difficult to adjust these properly unless you really know what you're doing, especially if you're adjusting the ratios individually, but well-tuned gear ratios can greatly increase your ability to succeed on a given course.
Higher ratios here (i.e. moving the sliders to the right) will increase your acceleration, while lower ratios (moving the sliders to the left) will increase overall speed. Luckily, with Forza 3's built-in benchmarking utility, you can quickly get feedback on the efficacy of your ministrations and correct any mistakes you might be making before you get too out of hand. In our experience, most cars can get a bit more top speed by individually adjusting the top gear, but it will take you longer to reach said top speed, so you'll only want to perform such tuning when dealing with a course with fairly long straights.
You can also attempt to twiddle with the lower gears and tighten up the ratios there for better acceleration on courses with lots of sharp turns, but in our experience, the preset settings were usually suitable for most situations.
Alignment
Camber: Camber affects how your car's wheels are tilted towards each other. A zero-degree camber means that the wheels are perfectly aligned when resting on a flat surface; negative camber will tilt the tops of the wheels inward; and positive camber will tilt the tops of the wheels outward from the body of the car. Increasing negative camber will reduce understeer, while reducing negative camber will reduce oversteer. You can adjust this individually for each axis, so if you find your rear wheels slipping on corners (we're looking at you, Tom's Z382 Soarer), you may want to try adjusting the rear axis by itself to see if you can't correct this.
Toe: Toe is similar to camber, but along a different axis. A negative degree of toe will result in "toe-in," where the fronts of your wheels will be closer together than the rear, while a positive degree of toe will result in "toe-out," where the fronts of the wheels will be farther apart than the rest of the wheel. For the front axle, toe-in will increase your turning ability but hurt your overall stability, while the situation is reversed with toe-out. Any kind of severe toe will decrease your tire lifetimes, meaning that you probably don't want to fool around with these settings too much if you're going out on an endurance race.
Caster: Caster affects the tilt of the steering pivot relative to the vertical axis. Only positive caster angles seem to be possible in Forza 3, meaning that the top pivot of the axis will be further towards the rear of the car than the pivot that actually connects to the wheel. A positive caster will increase the amount of camber that wheels are affected with while turning, allowing you to run with lower inherent camber numbers. On heavier vehicles, though, lower caster angles can increase responsiveness while turning, so you'll need to fine tune this in conjunction with your camber for maximum responsiveness in turns.
Anti-Roll
Anti-roll stiffness will affect how rigid the bar between the inside and outside tires is kept in a curve. Increased rigidity in the front anti-roll bar will increase understeer, giving you a bit more safety in blown corners, but it's mostly noticeable in long, flat corners, rather than in sharp turns. If you find that a car has too much oversteer in long corners, reduce stiffness and see if that helps.
Springs
Your spring settings affect how well your car handles uneven ground and cornering. Soft springs are a good thing when dealing with uneven ground and bumps, as stability will increase due to the increased movement of the springs. Stiffening the springs will decrease the speed of their movement, giving you improved control in corners.
Your spring settings are going to be something you should adjust on a track-by-track basis. Tracks that force you through elevation changes through turns, such as many of the mountain point-to-point tracks, will benefit from setting a softer spring setting, as you'll gain stability. On flat tracks with sharp turns, though, you're going to want to have somewhat stiffer springs, as you'll be able to turn more precisely. You'll still need to be wary of sudden elevation changes, especially when it comes to grip pads on corners. If you hit a grip pad with two wheels while your springs are set relatively stiff and happen to bump those wheels into the air, it'll be quite difficult to regain control while still turning.
Ride Height: Ride height can be modified in the Springs menu as well. Generally speaking, you're going to want to lower the ride height as much as possible, as this is going to lower your car's center of gravity and increase cornering stability by letting your tires grip the road more closely. If you get too low, however, you can find yourself scraping the ground when heading over sharp bumps, which will affect your speed. If you're willing to test a car out on the track before using it in a race, you may want to just completely lower this setting all the way and take your car out for a spin on a course with some elevation changes. If you find yourself scraping the tarmac, start upping the height until you find something comfortable.
You can also attempt to adjust the front and rear height individually to increase downflow and give you more oversteer and a bit more acceleration off the line. You're going to want to have a lower front end than a rear in this case, but don't overdo it, or you'll have a hard time toeing the line in turns.
Damping
Damping acts as something of a counterbalance to your spring settings, in that you can manually adjust how quickly the springs recoil into their original state after absorbing a shock. There are two settings here: bump damping, and rebound damping.
Bump Damping: Bump damping controls how quickly the springs will recoil upwards after absorbing a shock from the road. Stiffening these settings will prevent the springs from coiling too quickly, thus preventing your car from diving too much when braking into a curve. These are individually adjustable on the front and rear, and you'll always want to have stiffer dampers in the front of a car than in the rear. When you have to brake hard when entering a turn, most of the energy in your car will shift forward, thus compressing the forward springs more than the rear; to keep your car balanced, you'll thus want to make sure that your front springs are a bit more resistant. Good braking emphasizes the shifting of weight to the fore of the car without too great of a "dive" effect, which will reduce traction on the rear tires and make for a less stable turn.
That said, you can overdo the stiffening of your dampers, especially if you also stiffened up the springs themselves for extra control. If you have stiff springs and dampers, you're going to have a lot of control, but your car will be quite bouncy; you'll want to soften up the dampers to get yourself back some stability and control over uneven surfaces. Overstiffening the front dampers in particular will prevent adequate weight-shifting and increase your braking distance.
Rebound Damping: Rebound damping controls how quickly your springs return to their normal positions after absorbing a shock. These need to be stiffer than the bump dampers, as they act to return stability to your car after braking, but setting them too high will likewise increase your braking distance.
Aero
Downforce: Downforce is an important component of a car's overall handling capabilities. When you've set up a car so that air flows more quickly underneath it than over it, the different air pressures will cause a net downward force on your car, thus causing your entire car to grip the road a little more tightly. This will give you better grip on your tires and increased control, but will also cause increased tire wear. Note that you can overdo downforce, which will cause your car to be sucked into the ground by a massive difference in pressure; this will result in sluggish handling, so try to stay in the sweet spot if possible.
Braking
Balance: With the balance bar, you can adjust the balance of braking forces between the front and rear brakes. Biasing this towards the rear will let you turn in more quickly, but will reduce stability, while favoring the front brakes will increase your stability while braking; helpful for those cars that tend to shudder or shake when you're slamming on the brakes.
Pressure: This affects the sensitivity of the brakes relative to the amount of force you apply to the brake pedal (or, if you're using a controller, the left trigger). This setting will largely depend on your car and the specific track you're working with. Having a higher pressure will increase brake sensitivity, which can be helpful on hairpins, but will make it more difficult to feather the brake on wider turns. By the same token, reducing total pressure will make it easier to feather due to the fact that the brakes will be less sensitive, but will make it tougher to lock up your brakes when going full-speed into a corner. Reducing pressure all the way will cut out your brakes entirely - try doing this on one of your buddies' Xboxes and see what happens the next time they load up a race!
Note that pressure here won't have much of an effect on your braking distance; brake balance is what you want to tweak for that.
Differential
Acceleration: Increasing acceleration differentials can help prevent squealing tires when powering through corners by increasing traction, thus letting you accelerate more quickly when coming out of a turn. If you push this setting too high, though, you can stiffen up your turning and reduce response.
Deceleration: Higher deceleration differentials will increase the traction of your wheels when braking into a turn, thus giving you mildly shorter stopping distances. On 4WD and especially rear-wheel drive cars, increasing your deceleration differential will also increase traction while braking, thus helping you turn in, but as with acceleration differentials, setting this too high will make for sluggish turns.
4WD Cars: Note that 4WD cars will have Acceleration and Deceleration settings for both their front and rear wheels, since power from the engine is used to rotate all of them. They'll also have a torque setting, which will enable them to shift power either front or rear, to increase or reduce oversteer and make the car handle more like a RWD or FWD car, within a limit.
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