Basically when you set the AC to 'auto' the car will also automatically control the recirculate setting as well. It will automatically turn recirculate on/off. If the desired set temp is similar to the outside it will turn off recirculate to bring in the outside air, if you want a set temp to be much lower or higher than the outside it will turn on recirculate to more quickly cool/heat the cabin, etc.
When you see a greyed out blue recirculate icon it means the car has decided to turn on recirculate now but it's greyed because its in control of the setting. If you manually tap the recirculate button, recirculate will remain on/off until the next time you toggle AC auto off/on again (not sure if it resets when the car goes to sleep or not). Basically once you tap the recirculate button once it will give you full control over it and remain in whatever state you set it to.
This
video explains it briefly at the start but it's basically what I said above.