There are four altitudes a pilot must know, and the best reference is FAA-H-8083-25B – Pilot’s Handbook of Aeronautical Knowledge.
A. Actual altitude: If the surveyed field elevation is 4,379 feet, your aircraft is sitting on the field and the field is level, then the actual altitude of your aircraft is 4,379 feet. If your GPS is good, i.e. WAAS good, it’ll provide you with an accurate actual altitude. My WAAS-enabled, handheld Garmin eTrex Legend C, for example, always shows an elevation within about 10 feet of my surveyed location.
B. Indicated Altitude: If you enter the local altimeter setting in the Kolsman window of your altimeter, then your altimeter is giving you your indicated altitude.
NOTE: Your indicated altitude will only equal your actual altitude if the temperature at your actual altitude is commensurate with 59 deg F at sea level minus the standard lapse rate. Barometric pressure is the major factor, which is why we correct for it via an altimeter setting. Extreme cold temperatures can affect it, as well, and those correction factors are found in multiple places. “Adjustments to compensate for nonstandard pressure do not compensate for nonstandard temperature. Since cold air is denser than warm air, when operating in temperatures that are colder than standard, the altitude is lower than the altimeter indication.” – PHAK, section 8-4
Other factions adversely affecting the difference between your indicated altitude and your actual altitude (SO critical for clearing terrain!) include nonstandard lapse rates caused by adiabatic changes in air temperature when an air mass is lifted by winds over a mountain range. This is why PHAK stresses: “When flying over high, mountainous terrain, certain atmospheric conditions cause the altimeter to indicate an altitude of 1,000 feet or more higher than the actual altitude. For this reason, a generous margin of altitude should be allowed—not only for possible altimeter error, but also for possible downdrafts that might be associated with high winds.”
C. Pressure Altitude. The Pressure Altitude is the height above a standard datum plane: Standard atmosphere at sea level is a surface temperature of 59 °F or 15 °C and a surface pressure of 29.92 inches of mercury (“Hg”) or 1,013.2 mb.
There’s two ways to determine your pressure altitude:
1. Set 29.92 in the Kolsman window of your altimeter. Your altimeter will display your Pressure Altitude, within the error of your altimeter and
2. Set the local altimeter setting into the Kolsman window of your altimeter.
Your altimeter will display your Indicated Altitude. Next, apply a correction factor to the indicated altitude, based on the local altimeter setting, to obtain your pressure altitude.
D. Density Altitude: Pressure Altitude corrected for nonstandard temperature.
While air density is affected by changes in altitude, temperature, and humidity, calculations for computing density altitude are limited to altitude and temperature, as humidity has a comparatively small effect. It is important to keep humidity in mind, though. The calculations for density altitude are based on perfectly dry air. Thus, since water vapor is less dense than air, higher levels of relative humidity result in less dense air, thereby decreasing performance.
NOTE: A pound of 80°F. air in the atmosphere at saturation, 100% relative humidity, will contain .0022338 lbs of moisture. While water vapor is 32% lighter than air, the simple fact of the matter is that even at 100% RH, only a small fraction of the air contains water vapor, specifically, 0.22338%. Thus, the density difference between 0% RH air and 100% RH air at 80 deg F is just 0.22338%. Therefore, while humidity does make a difference, it’s a very slight difference. It doesn’t hurt to keep it in mind when your aircraft’s takeoff and climb performance computed with 0% RH density altitude is within 10% of your required minimum performance. If that’s the case, alter something to create a bit more cushion. You might, for example, consider leaving the bowling ball behind.
E. Absolute Altitude: This is your altitude above the ground beneath you i.e. your AGL (above ground level).