Why is "auto adjust brightness" washing out my retina display on El Capitan?

It is a new feature called ‘Ambient light compensation’. Before the Beta 7 or so it was a separate option in that menu on your screenshots, but in newer betas and in the finale release Apple merged it with the ‘Automatically adjust brightness’ checkbox, so yes, it is now adjusting not only backlight brightness, but gamma as well.

The only solution I found so far is to turn off that checkbox and adjust backlight brightness manually, which isn't a solution really. Hope Apple will bring back a separate checkbox for ambient light compensation.

The solution, posted as a comment by user Nicnl, is as follows:

1. Disable SIP:

   • Reboot into Recovery Mode (hold down ⌘R on startup).
   • Open Terminal and enter the following command

     csrutil disable

   • Reboot back into macOS.

2. Open Terminal and type in the following:

   cd /System/Library/PrivateFrameworks/AmbientDisplay.framework/Versions/A/XPCServices/com.apple.AmbientDisplayAgent.xpc/Contents/MacOS/
   mv com.apple.AmbientDisplayAgent _com.apple.AmbientDisplayAgent

   The first command just changes the directory you are in, while the second one renames the file to something macOS can’t find.

3. Enable SIP

   • Reboot into Recovery Mode (hold down ⌘R on startup).
   • Open Terminal and enter the following command

     csrutil enable

   • Reboot back into macOS.

Taken from here.