This article is from the Bicycles FAQ, by Mike Iglesias with numerous contributions by others.
Six adjustments can be made when setting up SPD cleats. With the foot
parallel to the ground and pointing in the direction of travel, the
1) Left/right translation
2) Front/back translation
3) Up/down translation
4) Front to back tilt
5) Side to side tilt
6) Azimuth, often called "rotation"
Front to back tilt is adjusted as the bicycle is pedaled since the
pedals themselves rotate freely in this direction.
Some people may need to adjust side to side tilt, but this requires
the use of shims which are not provided and can cause the cleat to
protrude beyond the tread of the shoe. Custom insoles that have
one side slightly thicker than the other may have the same effect
as shims between the cleat and the shoe.
Separate up/down adjustments for each leg may be necessary for
individuals with established leg length differences. To adjust
up/down translation in one shoe use a combination of an insole
and raise or lower the seat. To make small up/down changes
equally in both legs, simply raise or lower the seat.
The usual adjustments for SPD cleats are left/right, front/back,
and Azimuth. Of these Azimuth is the most sensitive. For most
people these three adjustments are sufficient to obtain a