What is the difference between "Aquí", "Ahí", "Allí" and "Allá" and when to use them?

These all refer to distances from a certain point. "Aquí" is translated to here, "Ahí" is there (out of reaching distance but still within sight), "Allí" is over there but at a greater distance than "Ahí", "Allá" is also there but expressing a much greater distance even so. For example, you could say: 'Mi lápiz está aquí' - here is my pencil. 'El basurero está ahí' - the bin is there. 'El telefono está allí' - the telephone is over there. 'La casa de mis abuelos está allá' - my grandparents' house is over there.