A window air conditioner that is set to "circulate" actually re-circulates the air in the room being treated. This feature returns cooled room air to the unit, allowing a constant reduction in temperature. The cooler the intake air temperature, the cooler the discharge air will become. The air conditioner may lower the temperature below your comfort level, depending on room size and machine rating.
Select the "circulation" setting during high activity periods when doors are used and outside entry is frequent. When someone enters a room from outside, they place a heat load on the window air conditioner like a door that opens to outside temperatures. Recirculation keeps the introduction of high heat loads to a minimum by using air that has already been conditioned.
The "ventilate," or fresh air setting on the window air conditioner directs outside air into the machine. When outside temperatures decline as they do at night, this setting may help to dispell odors trapped indoors by the day-long use of recirculated air. In closed rooms occupied by multiple people, the air quality may actually suffer somewhat from recirculation. The "ventilate" setting combats stale air by constantly introducing and conditioning fresh outside air.
Maximum cooling is attained with the "circulate" setting of a window air conditioner, but cooking odors or other stale air may justify a temporary adjustment to "ventilate." Empty rooms can be kept coolest by recirculating the air during the day, but replenish the room with fresh air when it is closed and occupied for extended periods. A stuffy bedroom may disturb your sleep and detract from the benefits of the window air conditioner.