Consult the Firebuilding article for more detail on the production of charcoal in Firepits. For the more advanced forms of charcoal productions, see the article in the Tale 2 Wiki until someone updates it here (charcoal hearth appears to work the same and produces 100 charcoal per run, whereas charcoal oven produces 200).
copied from tale 2 but holds same idea to T3
The regulator appears to control the amount of random shift in the hearth's behavior; increasing the regulation reduces the randomness and increases the time between ticks (allowing you more time to respond). Try starting with the hearth set to no more than 2. If you have problems, increase the regulation a step or two, and try again. With some experience, you should be able to make the hearth work most of the time with no regulation. Regulation is excellent for controlling randomness when running multiple hearths (4+)and with patience you can succeed with efficiencies less than 2:1 without using any water (except to speed cooling to take your cc and start again faster).
You cannot change the regulation once the hearth is running, so make sure it's set where you want it before you start.
When you press the "Begin" button, the display immediately changes to six horizontal bar scales: Heat, Oxygen, Wood, Water, Danger, and Progress. Here's what they mean:
In addition, there are controls:
Heat is what makes charcoal happen. The higher your heat level, the faster the progress bar moves, and the sooner your charcoal is done. So the first goal is to keep that heat bar as high as possible. Anything less than halfway is going to bring your progress to a crawl, and at less than a third, you'll hardly see the progress bar move at all.
Oxygen is important for controlling heat. If you don't have enough oxygen, you can't burn wood, and the heat level will drop. The specific relationship here is a little foggy, but as a rule of thumb, try to keep the oxygen bar at no less than 1/3, and no more than the heat level.
Wood is your heat source. Adding wood will increase the heat level of the hearth, provided there's enough oxygen. Adding wood also appears to make the oxygen level drop slightly. As the hearth runs out of wood, you'll see the heat level drop, and the oxygen level will shoot up, even with the vent closed.
Adding water will reduce heat levels, which is normally a bad thing. However, it also tends to dramatically reduce danger level (see below), which is definitely a good thing.
Danger level is the bar to keep a close eye on. It appears to relate primarily to heat, oxygen, and water. As your heat and oxygen levels rise, the danger bar also rises. If you add water, the danger bar tends to drop. The danger bar must not be allowed to reach 100%, or the wood combusts, ruining the entire batch.
The vent controls are the final piece of the puzzle. Closing the vent (left button) reduces the amount of oxygen in the hearth, and tends to cause a small increase in heat. Opening the vent (right button) increases the amount of oxygen in the hearth, and tends to cause heat to drop.
Okay, so you've got the theory, now how about the practice?
First off, get your 200 wood, several jugs of water, and charcoal hearth together. Pin the hearth, check the regulation level and set as necessary, and then click Begin.
Every tick (once every few seconds), you'll see the bars move around a little. Here's what to focus on:
Start with the vent halfway open, and work on getting the heat bar to about 2/3rds. Try to control heat and oxygen levels by adding wood or by waiting, rather than resorting to the vent controls. If the danger bar starts getting too high, add a little water, and wait. The key to the process is to act cautiously, and use some forethought ("I just added some wood, that'll make the heat go up, so I'll wait a couple of ticks before adding any more"). Above all, practice!
Losing Control
The fastest way to lose control of the hearth is to add more than one of anything in the same tick. Avoid adding multiple units of wood or water to the hearth, as well as flipping the vent control from all the way open to all the way closed (or the opposite). If you're about to blow up your wood, you can try salvaging the process in this fashion, but usually it will only make things worse.
"Where'd All My Heat Go?"
It is possible to get the hearth stuck in a low-heat mode. It'll have plenty of oxygen, plenty of wood, but the heat level will be very low. The progress bar won't move, and despite the fact that you're stacking wood in the hearth, it won't get any hotter. While it is possible to recover, it takes a long time, a little luck, and a lot of wood. The best bet in this case is to abandon the project and try again; you'll get 50(hearth)/100(oven) wood back if you just let the hearth go out. To avoid this situation, focus on keeping that heat bar up, and don't be too quick to use the vent controls!
Vent Controls
It appears that the vent has a massive effect on oxygen and a minor, inverse effect on heat. Thus, one might be tempted to close the vent in order to boost the heat, rather than adding wood (hey, the vent is free, right?). However, closing the vent actually appears to take energy out of the system; in other words, the small bump in heat levels is offset by the large drop in oxygen levels. Over time, closing the vent repeatedly will actually tend to reduce the temperature of the hearth, and can lead to the vicious low-heat cycle described above.
Stopping the Hearth
Dump a lot of water (hit the button 3 or 4 times in a single tick) and open the vent all the way. The oxygen level will shoot up, the heat and danger levels will plummet, and you'll have the hearth turned off in a matter of a few seconds. This does not reduce the yield, and should not cause any increase in the danger level.
Advanced Techniques
Final Thoughts
Practice, practice, practice. There's a lot of guesswork and instinct involved in hearth operation that cannot be conveyed without experience. Sit down with a few hundred wood, and practice making charcoal. Try forcing the hearth into certain "bad" states, so you'll better understand how to avoid them. Also, if you find something that works for you, and it's contrary to this document, don't hesitate to use it; this is based solely on my experiences and preferences, so it may not work for everyone. I just hope to help one person out there who is ready to kill their charcoal hearth.