The orange boxes in the above diagram show the potential valid states a given case can have. The lines between the boxes indicate the state transition rules. These rules govern the states a case can move to while it's in a given state. For example, the above diagram indicates a high bill complaint that's in the Lodged state can be either Canceled or moved into the Preliminary Investigation state.

When you set up a case type, you define both its valid states and the state transition rules.