Manual Reference Counting has the developer take care of the allocation and release of the object life cycle by using new/delete, alloc/release. You have to make sure every alloc is matched with a release.
MRC behind the wheel :
1. Every time you create and allocate an object, you increase the reference count of the variable. So suppose you created object foo , so now the reference count got increased to 1.
2. If any other object is also referring to this object, then the count increases to 2.
3. Now if I decide to remove my ownership and i want to remove my reference, then the reference count drops by -1;
So technically, every reference to an object is referenceCount++ and every release of the object is a referenceCount–
Once the reference count reaches zero, that’s when the object foo becomes eligible garbage collection.
Automatic Reference Counting – the iOS compiler looks after the memory management. Thus, you don’t have to worry about releasing the objects. You just allocate and that’s it.
In other words, it is a memory management enhancement where the task of keeping track of reference counting for objects is removed from the programmer and onto the compiler.
ARC differs from Cocoa’s garbage collection  in that there is no background process doing the deallocation of objects. Unlike garbage collection, ARC does not handle reference cycles automatically. It is up to the program to break cycles using weak references.
Developers no longer have to worry about retain / release of objects, you don’t have a garbage collector process slowing execution randomly, and you still maintain fairly tight control over memory usage.
How ARC works
ARC works its magic at compile time to do the reference counting for you thereby making it unnecessary (and actually non-allowed) to use any other sort of memory management.
Now what ARC does is it looks up your code, sees where the scope of the variable ends and then adds autorelease, on those objects, and release is deprecated.
So what autorelease does is it adds the object to AUTORELEASE POOL , which basically means once the scope/block ends, objects in that block will be sent release messages.
Why it does not use Garbage Collection
At WWDC 2011, Apple explained that they didn’t want garbage collection on their mobile devices because they want apps to be able to run with the best use of the provided resources, and with great determinism. The problem with garbage collection is not only that objects build up over time until the garbage collector kicks in, but that you don’t have any control over when the garbage collector will kick in. This causes non-deterministic behavior that could lead to slowdowns that could occur when you don’t want them.
Bottom Line: You can’t say, “OK. I know that these objects will be freed at X point in time, and it won’t collide with other events that are occurring.”