The Levels adjustment is in the form of something called a histogram. A histogram is a way of plotting the distribution of values within a dataset that is at least one hundred years old. Below is a histogram of the height distribution of fifty students:
Photoshop Levels histogram looks like this:
Heres how we read it. The Levels below is showing us the even distribution of values of a simple black to white gradient.
The Levels below is showing us the clumped distribution of the values of a simple dark gray to light gray gradient.
Here is a more realistic example. The histogram is showing us that the the brightest values in the image are only light grey.
As well as displaying data it Levels can also change the values.