Adding a filter using And means all the criteria must be met. Adding a filter using Or means any of the criteria can be met.
Think of adding a filter as asking for a type of pie. Your criteria are rhubarb and strawberry. When you use And, you get a rhubarb-strawberry pie. When you use Or, you may get a rhubarb pie, a strawberry pie, or a rhubarb-strawberry pie.
As an example, suppose you add two filters to the Include section:
Constituents who live in Indiana
Constituents who gave last year
If you add these filters using:
And: The report lists constituents who live in Indiana and who had transactions last year. These constituents meet both criteria. It does not list constituents who gave last year but do not live in Indiana.
Or: The report lists constituents who live in Indiana or who had transactions last year. These constituents meet either criteria. For instance, the report also lists constituents who gave last year and live in California.
And and Or work the same in the Include and the Exclude sections.