How do I set up Statuses and Transitions for Tasks?

Go into Administration -> Task, and you should see the following options.

Click on [Status]. From here, you can add/edit Statuses that apply to Tasks. Each Status needs a name, and a Type. These Types are based on the defaults provided by the system (Open, Under Review, Work in Progress, etc). Any "Closed" or "Complete" Statuses should be set as "Final=Yes", as they denote the end of a Task lifecycle.

Once all Statuses have been configured and saved, click on [Transitions]. From here, you can add/edit Status Lifecycle Transitions that apply to Tasks. Each Transition needs a name, with a Type specified as "Task". Denote what the Initial (First) Status should be in this Transition, and the Final (Last) Status should be. Click on [Add] to continue.

Scroll down, and you will see the following. From here, you can configure which Statuses can be changed to others (Open to Under Review, Under Review to Work in Progress, Work in Progress to Closed, etc). You need to do this, otherwise you will not be able to change a Task's Status. Scroll back up and click on [Save] once finished.

Click on [Type]. From here, you can add/edit Task Types. Give it a name, and assign the Status Lifecycle you created. Click on [Add] to finish. 

You will now be able to change the Statuses of Tasks that come under the specified Task Type.