This is a bit of a confusing process.
Basic Pipeline(Edit)
- Developer works on Makefile.am and configure.ac
 - (Some automatic steps)
 - Resulting process uses Makefile and config.h
 
...and in more detail(Edit)
- The top-level script (maybe autogen.sh, bootstrap, etc.) starts
 - autoreconf which runs:
 - aclocal to turn configure.ac into aclocal.m4, which is the input for both
 - autoconf, which produces ./configure, and
 - autoheader which makes config.h.in, then
 - automake which turns Makefile.am into Makefile.in, and then
 - ./configure turns the user's input, results of its tests, and Makefile.in into Makefile plus config.h.in into config.h
 
For more(Edit)
See the Goat Book - http://sources.redhat.com/autobook/
It's an open book, so you can get the full source, here:
cvs -d :pserver:anoncvs@sources.redhat.com:/cvs/autobook co autobook