It's the mixture between the fuel and the air that the engine uses. Rich uses more fuel but gives more power, but means you may run out. Lean will give less power, but means that you won't run out. Standard is a compromise between the two other options.
As you have a limited amount of fuel for the race, you cannot run the whole race in rich or you will run out.
I use lean engine mix in practise sessions to get known with track, rich mix in quali and standard in most of the race. Also rich mix is good when fighting / defending position
Fresh prime tyres will need at least half a lap to warm up and setting the fuel to RICH would be a waste. Same for badly worn tyres, so that's the time to set the fuel to either LEAN or NORMAL. I'm usually setting the fuel to LEAN until I enter sector 3 on fresh tyres. Having the fuel setting set back to NORMAL is usually good for the last 2 laps on worn tyres. You won't be remarkably faster anyway.
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