This seems to be available in most of recent Canon cameras. I am curious how it works, and how it is different from the Auto Lighting Optimizer. Is it a useful function?
Highlight tone priority is a camera mode that internally fiddles with exposure to preserve as much detail as possible in the "highlight range" of tones...the brightest tones in a photograph. It does this, however, at the cost of tones in the shadow range, as the ultimate effect is a shift of the histogram down towards the shadows. The cost of shadow tones is a bit less than the gain in highlight tones, however it is something to be aware of.
It should also be noted that HTP affects both RAW and JPEG images. This is in contrast to Automatic Lighting Optimizer, which applies an alternative tone curve when processing the sensor output for saving to JPEG. ALO only affects JPEG images, and has the tendency to compress dynamic range...thus costing you in your overall tonal range.
Highlight priority underexposes by one stop by lowering the ISO, for this reason ISO 100 cannot be selected with highlight priority. In post-process the camera compensates for the underexposure, except for the highlights
As a RAW shooter you can achieve the same result by underexposing your shots with 1 or more stops and then lifting everything but the highlights in post. You should only employ this technique in shooting situations where you are likely to get blown out highlights. In more evenly lit situations you will generally get better image quality correctly exposing the image in the first place.
Some photographers often underexpose by 1 stop because sensors lose information in the highlights much easier than in the shadows. Film users also did this quite often by exposing and developing ISO 100 film as if it were ISO 200 film, i.e. you would have ISO 100 film in the camera and tell the camera it was ISO 200 film; this was called pushing the film. You would let the processing lab know you had pushed the film to ISO 200. Because of the characteristics of film the highlights were then actually automatically compressed and preserved. This did come at a cost of increased grain and contrast. Pushing the film was more commonly used to get a higher shutter speed in low light shooting conditions.
This is one of the few image-enhancement settings that is extremely useful. It is in the custom menu because once you set it, you leave it and do not fiddle with it between shots.
When enabled, your camera will preserve more details in the highlights at the expense of some details in the shadows. If your style is to expose for the highlights, then it will greatly help. If you do not know what your style is, just turn it on, you'll thank me later ;)
NOTE: There is another semi-related setting called something like 'Lighting Optimizer', make sure that one is OFF since what it mostly does is make your photos look dull with less contrast and adds noise to shadow areas.
Excerpt from an official Canon Quick Guide:
Highlight Tone Priority (HTP) All cameras have a fixed dynamic range, from shadow to highlight, that they can capture. HTP shifts some of the available dynamic range from the mid-tones to the highlights to produce smoother tones, with more detail in bright areas. This helps prevent JPEG images with overexposed highlights that can’t be recovered. HTP is also useful to RAW shooters who process their images with Canon’s DPP software. Most third-party RAW processing software will not recognize Highlight Tone Priority. When the camera is set to HTP, the lowest available ISO will be 200. The HTP setting will be indicated by a D+ symbol in the LCD display. Avoid using HTP in low light or when shooting subjects with heavy shadows because it may cause more noise to appear in those areas.
furthermore it says about automatic lighting optimization:
Auto Lighting Optimizer (ALO) ALO performs in-camera processing to help preserve shadow detail in high-contrast scenes. It also adds a modest boost in contrast to low-contrast scenes. The amount of adjustment can be set to Off (0), Low (1), Standard (2) or Strong (3). ALO can be useful for JPEG shooters working on a deadline and who don’t have time to manually adjust the contrast of each photo.
Recent EOS models apply ALO at the Standard level by default, even when set to Manual exposure mode. Users who desire full control over shadow and highlight values may therefore wish to turn ALO off.
Link to the Source: Canon QuickGuide to EOS Custom Functions (PDF File)