The main reason for different grinds is the different brewing processes. If the water is exposed to the grounds for a very short amount of time (e.g., 10-15 seconds for espresso), you need a finer grind to provide enough surface area to extract the coffee from the beans. If the brewing time is long (e.g., the ~4 minutes of french press), you need a coarse grind to avoid over-extracting the grounds and getting something too bitter to drink.
That's really the heart of it. If the grind is too coarse for your brewing method, your coffee will end up under-extracted, weak, and acidic. If it is too fine a grind, your coffee ends up over-extracted and bitter. Your grinder is a good brand; if you still have the manual, it includes a guide to grind vs. brewing method. If not, the capresso.com site includes PDF versions.