The auto scaling capability of Google Compute Engine dynamically modifies the number of virtual machine instances based on varying traffic or workload requirements. This functionality guarantees that applications operate efficiently without the need for manual adjustments and minimizes costs by reducing resources when demand decreases. Users have the flexibility to set scaling guidelines according to particular metrics, like CPU usage or request frequency, allowing for tailored resource distribution. New users are also offered $300 in free credits, giving them the opportunity to experiment with and optimize auto scaling for their specific needs.