I just found this awesome talk by Elder Bednar. He confirms that yes, discerning evil so it can be avoided is an important part of this gift. But he also shares this quote from President Stephen L Richards:
“First, I mention the gift of discernment, embodying the power to discriminate … between right and wrong. I believe that this gift when highly developed arises largely out of an acute sensitivity to impressions—spiritual impressions, if you will—to read under the surface as it were, to detect hidden evil, and more importantly to find the good that may be concealed. The highest type of discernment is that which perceives in others and uncovers for them their better natures, the good inherent within them."Elder Bednar then goes on to say:
"First, as we “read under the surface,” discernment helps us detect hidden error and evil in others.Second, and more important, it helps us detect hidden errors and evil in ourselves. Thus the spiritual gift of discernment is not exclusively about discerning other people and situations, but, as President Cannon taught, it is also about discerning things as they really are within us.Third, it helps us find and bring forth the good that may be concealed in others.And fourth, it helps us find and bring forth the good that may be concealed in us. Oh, what a blessing and a source of protection and direction is the spiritual gift of discernment!"
I find that so lovely and enlightening. I had not previously known what he lastly says: "Discernment is so much more than recognizing right from wrong. It helps us distinguish the relevant from the irrelevant, the important from the unimportant, and the necessary from that which is merely nice."
Isn't that just marvelous? We don't seek the gift of discernment so that we can avoid people; we seek the gift of discernment so we can bless others and ourselves. God will warn us when necessary, but He will also expand our view to better match His own.
Read the talk for yourself here.