Transformations Between Datums

Anytime you display data in a map document in ArcGIS that has a geographic coordinate system (or in this case datum) that differs from other data layers in your map document or that differs from the data frame display coordinate system, you ArcGIS produces a warning to draw your attention to the fact that a transformation must occur between the datums. This is an opportunity for you to either select a specific transformation equation, or to allow ArcGIS to do its thing and choose an appropriate one for you. This is what 99.9% of GIS users do every time and I would hope that 99.9% of the time we are getting appropriate transformation results.

I have been tempted to go into the transformation list and choose different transformation equations and experiment with results. I wouldn’t recommend this unless you take the time to read up on the math and intentions of the predefined transformations that are available. The following list of transformations between NAD 83 and WGS 84 is a good illustration of why you shouldn’t make assumptions about the transformations. For example it might be tempting to assume that the transformation with the highest number was published most recently:

NAD_1983_To_WGS_1984_1: Published accuracy from EPSG is 2 meters. This transformation applies to the entire North American continent. This transformation uses the geocentric translation method, with the transformation's parameters (dx, dy, and dz) all equal to zeroes. This transformation treats the NAD 1983 and WGS 1984 datums as though they are equivalent.
NAD_1983_To_WGS_1984_2: Calculated by the U. S. Defense Mapping Agency (DMA), now known as the National Geospatial Intelligence Agency (NGA), for the Aleutian islands. Accuracy is listed by EPSG at +/-8 m.
NAD_1983_To_WGS_1984_3: Calculated by the NGA for Hawaii. Accuracy is listed by EPSG at +/-4 m.
NAD_1983_To_WGS_1984_4: Formerly applied within the 48 contiguous states, but is superseded by _5. This transformation method should no longer be used.
NAD_1983_To_WGS_1984_5: Transformation parameters calculated by the U.S. National Geodetic Survey (NGS) using CORS stations, and ties WGS 1984 to ITRF96. Accuracy according to EPSG is +/- 1 meter.
NAD_1983_To_WGS_1984_6, _7, and _8: Canadian NTv2 transformations, for the Quebec, Saskatchewan, and Alberta provinces, respectively.