Sorry, reading this and Andrew's answer makes me realize I'm being imprecise with my language. Thank you both for the correction.
Let's suppose I want to force all pixels to be at most 249 in all RGB values.
If I set the output control at 249 as in the screenshot, and the highlight warning at 250, then I reason I should see no highlight warning, since all pixels should have their R, G, and B channels mapped to 249 or less. Yet I see a highlight warning. Why is this?
In my reasoning, the clipping indicators point to Raw data being clipped, either by over- or underexposure, or e.g. by pulling in the
input controls at the bottom of the Levels dialog. Whatever these input controls are set to, the range between the minimum and maximum is
mapped to the output range that you can set in the upper
output controls..
So, originally, input level 0 is mapped to output level 0, and input level 255 is mapped to output level 255. When you lower the input controls to 250, then everything between 250 and 255 will be clipped to 250. In both cases, your setting of the highlight warning to 250, will show the same clipping warning, but only if you set the input control to 250 will the clipping really take place.
The output mapping takes whatever is offered as range, e.g. 0-255 or 0-250, and maps all those input pixel values in the range to the output values you set in the upper controls of the Levels dialog. It does not change the clipping of the input data, it just changes the output levels mapping.
I think this is working as designed.
Cheers,
Bart