This can be a confusing account in your chart of accounts.  The best way to describe it is like the QuickBooks cash bag.  This account "collects" all of your payments processed through the Receive Payments window (unless you deposit each payment individually to the bank register) and holds them in the asset account until you assign them to a deposit.  When you go to make a Deposit, the Undeposited Funds window automatically pops up, if it contains payments awaiting deposit.  (If it does not pop up automatically, you can also access it by clicking on the Payments button (with the dollar bill picture) along the top of the Make Deposits window.)  You simply check mark the payments you wish to deposit from this window and QuickBooks automatically transfers the information to the Make Deposits window.

If you should ever need to delete a deposit (possibly to edit or delete one of the payments recorded on it), QuickBooks still keeps the individual payment information in tact, so that this action does not affect your Accounts Receivable.  Essentially, QuickBooks throws the payments "back into the cash bag", or Undeposited Funds Account.  This frees up any of the payments so they can be edited.  You can then add them to a new (or existing) deposit by clicking on the Payments button and check marking the payments you want to add to the deposit.