How do manufacturers select the cabin pressure?
In principle, the optimal cabin pressure for people on board of an aircraft
would be sea level pressure. However, this would create very large pressure
differentials between the inside of the aircraft and the outside at high
altitudes, which puts a lot of stress on the fuselage. One could build an
aircraft that can withstand these pressure differentials, but this would make
the aircraft very heavy, something that is not generally desirable when
designing an aircraft. It would also require a lot of bleed air from the engines reducing available thrust. That is why the cabin pressure is typically lowered
when climbing to cruise altitude.
How much the pressure needs to be lowered depends on the maximum pressure
differential allowed between inside and outside. Newer aircraft designs
using carbon composite materials like the Boeing 787 Dreamliner or the Airbus
A350 can withstand higher pressure differentials and thus allow a higher
cabin pressure (lower equivalent cabin altitude) than older aircraft at the
same cruise altitude (see also: Do people get less airsick if cabin pressure is at 6000 ft.?).
The cabin altitude must not exceed 8,000 ft at maximum operating altitude on a commercial aircraft.
To make sure that the pressure differential does not limit the maximum altitude
an aircraft can climb to, the fuselage should be designed strong enough to
maintain at least this cabin pressure at the aircraft's service ceiling.
What do pilots select?
The pressurization systems on modern aircraft are largely automatized. The
system only needs to know the cruise altitude and the landing elevation. From
the cruise altitude it can calculate the target cabin altitude for the climb
and cruise segments, which keeps the pressure differential below the maximum
allowed value. From the landing elevation it can calculate the outside
pressure at the destination airport and then start to approach this pressure
during the descent.
On a Boeing 737 these two values have to be selected manually by the pilots on
the overhead panel using the dials below FLT ALT and LAND ALT:
(source: http://www.b737.org.uk/pressurisation.htm)
You can also see a switch to the right (currently set to AUTO), which puts the
system into automatic mode (it is also possible to control cabin pressure
manually, but that is out of scope for this question).
On most modern aircraft however, the flight management system (FMS) will
automatically pass on the two required values to the pressurization system.
Assuming the system is in automatic mode, no pilot input is necessary.