It auto changes. It's very quick, I don't notice when it does it unless I'm watching the icons, which don't change quite as fast as the connection itself. But also, it's very easy to open "Settings" and change either mode to off. For example, when I get to work it rolls over to wifi as I pull in the driveway. I usually turn it off because 3G is faster than our T1, but our fiber installation should be complete this coming week.
As an example, I often use instant messenger apps. As I'm leaving my house and it switches to 3G while we're messaging rapidly I usually don't notice. That is on my iPad 3G but I believe the iPad 2 that I bought on launch day has the same wifi controller.