Great post pgriz.
To add on to it...your meter in the camera is trying to adjust the light to get the exposure to an 18% grey level. Picture a ruler where you have black on one end, 18% grey right in the middle, and white on the other end. The 18% grey is the nice middle point for an exposure.
If you have a scene where the sky is bright and the foreground is dark, and you meter the sky (thus telling the camera that you want the sky to be well exposed), what the camera needs to do is bring down the exposure to get the sky nice and exposed. However, any adjustment to exposure the camera does applies to the entire image. So as the exposure goes down to make the sky nice, it also goes down to make the foreground even darker.
On the flip side, if you meter off the foreground (thus telling the camera that you want the foreground to be well exposed), the meter will see that is is dark and then will brighten the exposure to bring it from the black to the 18% grey. But again, by making the foreground brighter, it will also brighten the sky, which is already bright. So you end up with a nicely exposed foreground and a blown out sky.
So in other words, the dynamic range is too great for the camera to fully exposure the entire scene properly. The human eye is way more advanced than a camera lens, which is why we see things properly. Although if you stare at a bright sky for a while and then look at a dark, shaded area, you will first see only black and then your eye will adjust and brighten the black giving you more detail. So even the human eye has its limitations.
Funny thing... why did pirates where eye patches? Not because they had one bad eye. They often had eye patches on one eye to keep that eye in constant dark. As pirates would go from above deck where it is really bright to below deck where it is really dark, they would not want to wait for their eyes to adjust. So when they would go below deck, they would switch the eye patch to the other eye, so their eye that was covered, which is already in the dark, will pick up detail in the dark much quicker.
Ok... back to the topic...
How to fix the scene?
- this is where HDR often comes in. HDR stands for High Dynamic Range. What you essentially do is take 3 (or more) images, one in the middle exposure, one that is over exposed (giving you foreground detail but a blown out sky) and one that is underexposed (giving you detail in the sky, but a foreground that is all black). You then merge these images in an HDR software (Photomatix or PS) and adjust.
- use flash. If you have a person as a subject, then you can expose for the sky (making the person dark) but then use the flash to light the person. Works on people, but if you are doing a big street scene with a bright sky, you can't really light the entire street (well, you technically can, but good luck finding all those lights)
- think if you really need the sky or the foreground in the image and adjust your shooting angle. Adjusting your angle will minimize the really white or really dark parts of the scene.
Hope this helps...