I have read many times about recording low with -db's and headroom. Not sure I understand the fundamentals.
Is the reason for recording low that digital is more sensitive to incoming signal than analog? Also I have not come across the need for headroom? I know that in photography it is easier to fix a snap that is underexposed vs. one that is overexposed. Assuming same principle.
Yeah. It's a bit like the photo analogy. If you underexpose a photo the detail is still there (up to a point at least) and you can bring it up, perhaps with the addition of noise, but it's there. However, if you over expose and burn out a highlight, you'll never get detail in the highlight.
With sound, the equivalent to the burned out highlight is clipping. That's where the system, be it analogue or digital, runs out of capacity to store a louder signal. In technical terms, the round-topped sine wave can't go high enough and gets square across the top, sounding crappy.
The big confusion of levels stems from the fact that, in their wisdom, the developers of digital sound chose to use a different scale when measuring their signals. In the analogue world, 0dB on a meter is equivalent to a specific arbitrary voltage. The amount of headroom in an analogue system is set so there's lots of space for peaks to go above the zero level. Exactly how much depends on the gear but typically you can safely go about 18dB above the zero level. (Worth saying here that in analogue clipping also comes on more gradually than in digital.) Anyway, in analogue you'd normally record so the average is around zero with peaks going higher--how much higher depending on the material. However 8 to 10 dB above zero on the analogue meter is pretty normal...and still far enough from clipping that you don't have to worry about clipping.
In digital, they used the "Full Scale" (dBFS scale for metering. In this case, 0dBFS is the exact point where clipping starts (basically every one of your 16 or 24 bits is a 1 so you simply can't go any louder). This means that if you take the clipping point in analogue as +18 on the meter, this becomes the equivalent to the 0dBFS point in digital--and the equivalent to 0dBVU in analogue. That's why the common advice is to record averaging around -18 on a digital meter with peaks going up 8 or 10 dB above this.
At this point, despite having suggested -18 myself, I'm going to at least partly agree with Greg_L. It's easy to get hung up on numbers. A lot of my recordings are hotter than that. Really, it depends on common sense and knowing the sort of material you're recording. If it's and instrument (or vocalist) known for huge peaks, I probably will stick to something near the -18dB advice, knowing there are going to be lots of peaks higher. However, if it's something or somebody with less dynamic range I'll let the levels go higher--just making sure it's comfortably below clipping.
"Set the amp so it sounds good. Set the input gain so you get a healthy signal but it's nowhere near clipping. There, you're done. It really is that simple."
The above quote is a slam dunk if you can get that to work. However, I have the same problem as the OP. With less expensive gear - it is impossible to get a healthy signal with nowhere near clipping.
It's a total slam dunk if you only have one level control after the guitar amp (or, for that matter, any source). However, on lots of systems there may be more stages each with its own gain control. Taking it to an extreme, how about if you have a mixer with gain on the input, then a fader, then a master fader, then an input to an audio interface with a hardware gain control, then a software gain control in the computer. My point was that, however many steps you have, you want to avoid having one gain setting cranking up the levels with the next one cranking them down again. You're best to have everything running near the middle of their range. Since there's not a meter on all these stages doing this gain staging is often a bit of trial and error but, with experience, you just do it.
Edited to add: Farview is more succinct than me...I was typing while he was posting!