The altimeter measures the vertical elevation of an object above a given reference point. The reference may be the surface of the earth, mean sea level (MSL), or some other point. There are several different types of altitude, depending on the reference point used. The altimeter indicates height in feet above the barometric pressure level set in the altimeter window. For example, if the altimeter is set to 1020, it would indicate the height of the airplane above the pressure level of 1020 hPa. If this is the correct local altimeter setting, then the 30.00 hPa pressure level would be at sea level and the altimeter would indicate the true altitude above sea level (assuming standard pressure).
Indicated altitude is what you read on the altimeter when it is correctly adjusted to show your approximate height above mean sea level (MSL). Use indicated altitude, when operating IFR below 3,000 feet MSL in the Netherlands for example (18,000 feet in the USA). Calibrated altitude is indicated altitude corrected to compensate for instrument error. Pressure altitude is displayed on the altimeter when it is set to the standard sea level pressure of 1013 hPa. It is the vertical distance above a theoretical plane, or standard datum plane, where atmospheric pressure is equal 1013 hPa. Regulations require the pilot to set the altimeter to 1013 hPa when operating at or above the transition altitude (Netherlands 3,000 feet MSL, USA 18,000 feet MSL). Altitude above the standard datum plane is referred to as flight levels (FL). For example 23,000 feet is referred to as FL230.
Density altitude is pressure altitude corrected for non-standard temperature. It is a theoretical value used to determine airplane performance. When density altitude is high (temperature above standard), aircraft performance suffers significantly. Most aircraft documentation gives the pilot performance information based on pressure altitude and temperature, rather than explicitly using density altitude.
True altitude is the actual height of an object above means sea level. On aeronautical charts, the elevations of such objects as airports, towers, and TV antennas are true altitudes. Unfortunately, the altimeter displays true altitude in flight only under standard conditions. Non-standard temperature and pressure cause the indicated altitude to differ from true altitude. The true altitude computations a pilot makes with a flight computer assume that pressure and temperature lapse rates match a perfectly standard atmosphere, which is rarely the case.
True and indicated altitude are equal when flying with the correct altimeter setting and temperature conditions match International Standard Atmospheric (ISA) values. However, if the temperature is 10°C colder than standard, true altitude is about 4% lower than indicated altitude. This is an error of 500 feet at 12,000 feet MSL; a siginificant discrepancy if flying over mountainous terrain on a cold day. True altitude also equals indicated altitude when located on the airport ramp with the altimeter set to the local altimeter setting where it indicateds the field elevation.
Absolute altitude is the actual height of the aircraft above the earth's surface. Some airplanes are equipped with radar altimeters that measure this height above ground level directly. During instrument approaches, absolute altitude is used to define the height above the airport (HAA), height above the touchdown zone (HAT), and the threshold crossing height (TCH).