If you choose an ASIO device you will also be able to select which channels to use for multichannel devices.
To set up recording using an audio device, select the Record using an audio device option and select the device you want to record. You can specify whether to record as mono or stereo and if the device can record multi-channel you can specify which two channels will be recorded.
To set up recording using a MIDI device, select the Record using a MIDI device option and select the device you want to record. For more information about MIDI recording, see the MIDI Recording topic in this manual
Now if you are using ASIO hardware then you can check the Enable monitoring for ASIO devices box which will allow you to hear what you are recording through your headphones. However, a better approach to monitoring your recording is to use your hardware directly. Most external soundcards will allow you to directly monitor your input via a headphone output. This option will provide you with the best performance and zero latency."
If you are recording from a MIDI device (such as a MIDI piano keyboard) then you can monitor your recording using a VST instrument to synthesize the MIDI into sounds. To do this check the Enable MIDI monitoring via VST instrument for ASIO devices box and select from the drop down list which instrument you would like to use.