This very clear and simple article sums it up nicely: http://office.microsoft.com/en-us/sharepointserver/HA101774731033.aspx
I will attempt to make things even more concise, so as to distill this down to what I needed to know as we prepare to roll out farms in Asia and Europe.
- Don't set a time zone in the Central Admin Web Application General Settings as this will override the settings on the site collection or sub site (unless that is what you really want to do).
- Users will need "Edit personal user information" permissions if you want them to be able to set "My Regional Settings" (off the Welcome menu).
When a sub site is created it inherits the locale settings from the parent. These can be changed at the site level.
If a user has permission, they can override the setting for the sub site. When they uncheck Always follow web settings, they get locale, time zone, calendar and alternative calendar(??), work week and time format settings.
That's pretty simple. I will need to verify that this works consistently.
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