I can confirm this is how mine works. I get ambient air as long as the temperature control knob is in the blue zone (and the air conditioner hasn't been activated). I get different amounts of heated air blended in depending upon how deep I turn the temperature knob into the red zone. When in a/c mode, the blue zone controls how cold the air is.
The air conditioner only comes on if the knob is turned all the way to the cool side (or you have a defrost setting or turn the a/c on manually).
I am starting to figure all that out. On top of this it sometimes switches to Recirculation from fresh on its own. Just annoying to me. I like to keep my eyes on the road and just move my temp knob without other things happening.