Visually I can appreciate the difference, but in which situations should I prefer one over the other? Is there any point using them at all or can they be replaced by percent
Although the question assumes the reader already understands how the contain and cover values for background-size work, here's a plain-English paraphrasing of what the spec says, which can serve as a quick primer:
background-size: contain ensures that the entire background image will fit the background area, keeping its original aspect ratio. If the background area is smaller than the image, the image will shrink so that it can fit the background area. If the background area is either taller or wider than the image, then any parts of the area not occupied by the main image will either be filled by repetitions of the image, or letterboxes/whitespace if background-repeat is set to no-repeat.
background-size: cover makes the background image as large as possible such that it will fill the entire background area leaving no gaps. The difference between cover and 100% 100% is that the aspect ratio of the image is preserved, so no unnatural stretching of the image occurs.
Note that neither of these two keyword values can be expressed using any combination of lengths, percentages, or auto keywords.
So when do you use one over the other? Personally, I think cover has more practical uses than contain, so I will go with that first.1
One common use case of background-size: cover is in a full-screen layout where the background image is rich in detail, such as a photo, and you want to feature this image prominently, albeit as a background as opposed to the main content.
You want just enough of the image to be able to completely cover the browser viewport or screen, regardless of the aspect ratio of the viewport, or whether the image or the viewport is in portrait or landscape. You're not concerned if any parts of the image are cropped out as a result of this, as long as the image fills up the entire background area and maintains its original aspect ratio.
Here's an example of a layout where the content is housed in a semitransparent white background, which hovers over a full-screen background. When you increase the height of the preview pane, notice that the image automatically scales up to ensure that it still covers the entire preview area.
html {
height: 100%;
background-image: url(http://upload.wikimedia.org/wikipedia/commons/1/1a/Bachalpseeflowers.jpg);
background-position: center center;
background-size: cover;
background-repeat: no-repeat;
background-attachment: fixed;
}
body {
width: 80%;
min-height: 100%;
background-color: rgba(255, 255, 255, 0.5);
margin: 5em auto;
padding: 1em;
}
If you use background-size: contain instead, what happens is that the background image shrinks in order for the entire image to fit in the preview pane. This leaves ugly white letterboxes around the image depending on the aspect ratio of the preview pane, which ruins the effect.
So why would one use background-size: contain if it leaves ugly blank spaces around the image? One use case that immediately comes to mind is if the designer doesn't care about the blank spaces, so long as the entire image fits within the background area.
That may sound contrived, but consider that not every image looks bad with empty space around it. This is where the example of using a logo instead of a photo actually demonstrates this best, even though you probably won't find yourself using a logo as a background image.
A logo is typically an irregular shape sitting on either a blank or completely transparent background. This leaves a canvas that can be filled by a solid color or a different background. Using background-size: contain will ensure that the entire image fits the background without any parts of it being cropped out, but the image still looks right at home on the canvas.
But it doesn't necessarily have to apply to an irregularly-shaped image. It can apply to rectangular images as well. As long as you require that no cropping of the background image occurs, whitespace can either be seen as a reasonable tradeoff, or not a big deal at all. Remember fixed-width layouts? Think of background-size: contain as essentially that, but for background images and in both portrait and landscape orientations: if you can ensure that the content will always fit the boundaries of the background image at all times, then whitespace becomes a non-issue altogether.
Although background-size: contain will work whether or not the image is set to repeat, I can't think of any good use cases involving repeating backgrounds.
1 Note that if you're using a gradient as a background, both contain and cover have no effect because gradients do not have any intrinsic dimensions. In both cases, the gradient will stretch to cover the container, as though you had specified 100% 100%.