A, B and C are flash groups. All slaves in group A will fire at a certain power a, while all slaves in B will fire at a different power b. Same with C.
On every slave you can control in which group it is. The master flash itself is always in group A. You can't change that.
My typical use of this groups:
A contains all flashes on my left with are pointing to the subject
B contains all flashes on my right
C contains flashes that are in the background and not in the forground
Now, you have the option to manually set individual power levels for every group.
Alternatively you can use ETTL to have the levels determined.
A:B is a ratio between the first two groups. A:B = 3:1 would mean that 3 times more light is used from group A than from group B. In my standard setup that would mean, that the side to my left is pretty bright, while the side to my right is quite dark. A ratio of 1:2 would mean, that the right side is a stop or so brighter than the left. You can't go wrong with 2:1 or 1:2.
Now group C is special. It is an average of A and B. It's there for exposing the background at a level, which corresponds nicely with the complete illumination of the main subject.
My tip: in your EX580 manual there is quite a good instruction on how to work with the groups. It's well worth a read, because it will make your lighting better.
What about exposing with your master flash? An on-camera flash usually does NOT produce a pleasant light. You might want to use it to fill in the really dark shadows of your subject in certain cases. Example: Your main light comes from the right from slaves in Group B. You don't have ligth from the left. Now in order to avoid certain parts to sink into complete black, you might want to activate the flash of your master while choosing a Ratio like A:B = 1:4. Now your master will shoot at very low intensity, only to lift the shadows a little bit.
Besides such a situation, I would not recommend activating the master.
Makes sense so far?
In any case, there is nothing like doing it yourself. Head over to this post on SmokingStrobes and try out Lighting setup for flexible portait lighting.
You need 3 slave speedlights for the setup, so here are your options:
a) borrow yourself a 3rd slave
b) get a long ETTL cable from eBay so that you can take the master off camera
c) replace either one of the speedlights by a reflector
Thanks to Andras for the question