Charge and strap in your battery. You must learn to ARM and DISARM your helicopter first, get good at this since you must disarm your helicopter as soon as something goes wrong. For the AeroQuad software, to ARM and DISARM, lower the throttle joystick to the bottom, and the move it left for DISARM and right for ARM. With my circuit and modified software, LED3 being lit means the helicopter is ARMED.
This should be the first time when you have your motors running. Make sure you always have a good solid hold on the frame such that you will not be harmed by the spinning propellers. Also wear eye protection! Tuning is best done with two people, one person to hold the RC radio transmitter, and the other person to hold the helicopter.
First, read this: Pre-Flight Checkout List
Turn on the helicopter with the propellers installed. Run the configurator to calibrate all the ESCs (follow the provided official instructions). Make sure they spin according to the rotor spin direction diagram. If a motor needs to be reversed, then recall what I said about swapping the wires between the ESC and the motor.
There are several parameters that you can tune.
The transmit factor is there to adjust the sensitivity of your RC radio transmitter. This value depends on your personal piloting skills and preference. The smoothing factors are the constants for low-pass-filtering the RC PWM signals, leave them at the default values unless your transmitter is very noisy.
Perform a sanity test by using default values. Raising the throttle should move all 4 motors faster. Trying to yaw will cause two motors which spin in the same direction will spin faster than the other two. Trying to pitch or roll will cause opposing motors to spin at different speeds. You should be able to feel the forces with your hand that is holding the helicopter. Also use your hand to introduce forces, and the helicopter should respond by applying counteracting forces appropriately. If something doesn't make sense, a value is probably reversed/negative in the software, use the configurator to identify it and correct it in the Arduino sketch.
You can also adjust the PID constants to suit your airframe. Start off with the default values. The P term is adjusted first, try and rotate the helicopter by hand while it is flying, raise the P value until the helicopter resists your hand very well, but lower it if the helicopter oscillates. Do this for all three axis.
AeroQuad's documentation do not suggest you adjust the I term for acrobatic mode. It also says "A negative D value is used to help the AeroQuad change faster to a level position after forward flight. It is possible to leave D = 0 and still see attitude flight. Using a negative D value is only needed based on user preference."
My summarized version about PID tuning is really short, for more detail, please see:
Also see the official AeroQuad Configurator documentation
for more details about tuning stuff.