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On means the original Chinese reading. All kanji have Chinese readings because kanji formed in China and then the Japanese borrowed them and stuck on Japanese readings. Kun means the converted Japanese reading.

There's no easy way to know when to use which reading, you'll have to memorize them.
Just like suiyoubi. Sui is the on form of the kanji for water, mizu.

On-reading is usually used when the kanji is a part of a compound (two or more kanji characters are placed side by site). Kun-reading is used when the kanji is used on its own, either as a complete noun or as adjective stems and verb stems.

So if you think about the kanji hoshi meaning star, the kanji for constellation uses the on-reading. : ]

That rule might help >.<