Does Midtrans distinguish between authorization and settlement period?

It depends on the payment channel that is made by you.

For credit card payment method, YES. Midtrans does the difference between the authorization and settlement process.

Authorization process will be real-time, or when the transaction is done. As for the settlement process will be carried out every day at 3 PM in the next day (D+1). For example, all transactions carried out on Thursday at 00:00 AM - 23:59 PM will settled on Friday at 3:00 PM.
Merchant can do VOID on transactions (cancel the transaction) at any time prior to settlement, if for example, the product is out of stock.

For internet banking payment method, the result is real-time (Success or Deny), so merchant cannot cancel the transaction.