What is the Ambient Color in the Blender Internal Renderer exactly? I'm using Blender 2.77 and I have currently arrived at the native Blender Renderer engine, and I fully want to understand how it works and how I can use, adapt, modify it for my own Blender projects. 

I've already read many free e-books, articles and watched many videos about it, but I want to be able to truly understand AND visualize its inner workings.

Unfortunately the official Blender Render manual does not offer much in-depth/under-the-hood insight on how stuff really works.

QUESTION: - What ARE the World: Horizon, Zenith and Ambient colors?
Are they real light sources (which gets internally ray-traced) or simply visual overlays which gets mixed onto the camera image?
Ambient Color: The Ambient color is a constant color added to the reflection model. Light sources are summed together and used in the calculation of the diffuse and specular part (See Phong reflection model for details)

phong reflection = diffuse + specular + ambient


Horizon Color: The color to use when the raytracer does not find any intersection for the primary ray (direct ray from the camera). It does not influence the shading at all. You can see this as a sort of background underneath your render.

Zenith: When using sky_blend the background will blend from the Horizon Color to the Zenith. This is done by the output pixel coordinate so the result will be the same for all camera angles and positions.

So the Horizon Color and Zenith, that generates the background, can be seen as an underlay.