The stock ROM comes right out of the factory can do "cpu stepping" itself, just like the intel "Speedstep" thing. But the factory powersaving profile (or if you wish to call the scaling) might not match our taste. Then there it comes the apps called Setcpu which enhances the cpu stepping behavior according to our preference. The enhancement considers the frequency of sampling cpu load, thresholds modifications, and other considerations.
In Setcpu, we can accord one of the following scaling setting that suits our taste. From my experience, each scaling setting behaves as follows:
ondemand - runs at Min or at Max (eg. 200 MHz or 1200 MHz)
interactive - adjusts frequencies according to the real load
conservative - behaves like "interactive" but incline to power saving
performance - always runs at Max
powersave - always runs at Min
userspace - disables Setcpu scaling and uses stock scaling
smartass - behaves like "interactive" but always runs at Min when LCD screen is off
And again, the phone must be rooted and kernel modded for Setcpu to work properly.