If you've ever noticed that your guitar sounds in tune while playing open chords on the 1st-4th frets, then tried playing something above the 12th fret and it's suddenly out of tune, you probably need to set your intonation. Setting your intonation is essentially adjusting the length of the strings at the saddles of the bridge. You can tell if your intonation is off by playing an open note, then fretting a note on the 12th fret of the same string. Using a tuner, you can see if one is slightly different than the other. If it is, your intonation is off. If you have a really cheap guitar, setting your intonation probably wont help too much. I have a cheap Laguna and there's basically nothing that can be done to make sure it's consistently in tune at every fret. As long as you didn't get your guitar at a place like Walmart, setting your intonation can make a huge difference in how your guitar sounds.
The first thing you want to do is tune your instrument. This process works the same for electric, acoustic, and bass guitars. Make sure you tune your guitar to whichever tuning you are going to be using the most. You want it to be a very accurate tune, so get some new strings and make sure they are stretched out enough. You can do this by fretting a string at about the 17th fret with your left hand, then using your right hand to bend the string as far as it will go at the 24th fret. Do this all the way down the neck at 2 or 3 fret intervals with every string. Once the strings are stretched out good enough, tune your guitar with an accurate tuner. Programmable electric tuners that you can plug into directly are a good choice. I use a Snark Tuner which clamps onto the headstock and senses the vibration of the strings.
Now is the time to adjust your action. The action is the distance between the strings and the fretboard. If you can hear your strings buzzing when you strum, they are too close to the fretboard. The higher quality guitars can have the strings very close to the frets without buzzing. You can adjust your action 1 of 2 ways: tightening/loosening the trussrod, or raising/lowering the bridge. Once you start the process of intonation, you can't go back and adjust your action without having to adjust the intonation again.
Now you can set your intonation. The first thing you want to do is (using your tuner) compare the open note of a string with the 12th fret of the same string. If they are not the exact same note on your tuner, your intonation is off. You can fix this by adjusting the saddles on the bridge of your guitar. If the 12th fret of the string is sharp, you can fix this by moving the saddle back away from the headstock. If the 12th fret is flat, you can move the saddle forward towards the headstock. Tiny adjustments are key here. When you get close, compare the open note with the harmonic note on the 12th fret.
After you adjust the saddles on every string, go back and make sure every string is in tune. Stretch out the strings again and tune it for a third time, then repeat step 3 again. You may have to do this 3 or 4 times depending on how new the strings are. Repeat this process for every string, and once you do, your guitar should be completely set up. You may be surprised how different it sounds. You don't need to pay someone to do this for you, as it's a very simple process and anyone can do it if you follow this tutorial. It'll make your guitar sound a lot more powerful, especially when you turn on the distortion. Try it out! \m/