What Order status...Confused !!!

Hi

I've setup the test site on live server but little confused regarding the "order status" in the Admin setting that what to select.I've set the both order status and paypal status to "pending".

After the complete buying process the order status shows pending in admin but when I try to manually change to complete (just for testing purpose) it doesn't change and stays pending. is it some sort of automatic process that once the payment is made the status change by itself, i don't think so.
Payment module : Paypal (using paypal sandbox with buyer and seller a/c with enough virtual balance )

I'll really appreciate if someone explain to me regarding order status setting that what to set or not to make the buying and selling process smooth without any confusion.

Thanks

typically you set the default order status in the settings to pending
and the payment order status to Processing or Completed