Formatting pane levels

Can someone please explain the levels in the Formatting Pane of the Compile setup? I simply don’t understand the schema, and particularly why mine looks like this:

Screen Shot 2016-12-25 at 1.33.56 PM.jpg

I never assigned any level to any file as far as I know, so don’t know why the files are assigned as they are. How does one change the level of any particular file?

All help appreciated!

The levels in the Formatting pane reflect the outline hierarchy in the Binder of your project. The Binder will highlight the specific files assigned to each level. To change the level of a file, move it in the Binder.

The Formatting pane is discussed in more detail in Section 24.11 of the Scrivener manual.