Chelonian said:
I'd think setting your level as high as possible without any risk of clipping is the way to go
Not really. Headroom matters. It's good practice to set your levels without any risk of clipping but it does not have to be as high as possible. Audio signals are designed to operate at line level. Digital converters aren't made to a specific standard, but it's generally accepted that line level in the analog domain equals around -18 dBfs in your DAW. It's useful as an average value, not peak.
There are 2 different types of signal to consider. Transient peaks are fast percussive sounds. A lot of sources can have transient peaks. An obvious example is drums. Steady state signals are sounds that are mostly sustained notes like a synth or distorted electric guitar that have little or no spiky peak energy. Many sounds can combine the two types where you have transient peaks and sustain such as a clean guitar or an acoustic, piano, vocals etc...
Setting the average level of a steady state signal like distorted guitar is easy. If the meters stay parked right around -18 dBfs or so you're fine. At the other end of the spectrum if you're recording drums or something, the peak values can go higher but the average is still lower because the sound is all attack and decay with relatively little sustain. Letting your peaks go not higher than a certain amount can be helpful. Maybe that's -6 dBfs? -10 dBfs? It's not critical as long as it doesn't clip.
Digital meters work by showing you the sample values. With higher frequencies it can be an issue as the actual waveform can have a higher "true peak" value than what the position of the sample is. Sometimes it's called intersample peaks. As your levels get closer to 0 dBfs, there is potential for clipping that the meters won't show you.
With analog tape you set the levels around line level and the medium has a sweet spot. Keeping things on the strong side helps to improve signal to noise ratio and can affect the character of the recorded signal. Digital recording has a much lower noise floor and there is no sweet spot. There's usually little to no consequence to recording digital levels that are too low, within reason, unlike analog. Recording too hot is much more of a problem. When you can hear things get grainy and mushy from recording hot, it doesn't really matter what the lights and meters are doing.