How does ASP .NET MVC Application determine which config file to use when it has multiple environments?

I have a .NET 4 application with three different web.config files:web.dev.config, web.test.config, web.prod.config.

I know how to use the file transformation in the application (xdt:Transform) but my question is on the actual servers. What is the configuration I must make on the physical servers not in the app?

For instance, on the test server, should I set the environment variable to test so that when I deploy, the application will know that it is a test server? Is there any configuration on the test IIS web server?

OR simply - I have three physical servers which I want to make dev, test and prod so that I will deploy my .NET APP. Any configurations on the actual physical servers?