This option sets the sensitivity of clip detection in level meters, which appear in the meter bar and Record dialog. If a clip is detected on a given audio channel, that channel's clip indicator is set; the indication consists of a red rectangle behind the abbreviated channel name, which appears above the level meter. To reset a clip indicator, left-click it. To reset all clip indicators at once, Alt+left-click anywhere within the meter view.
The threshold is expressed in samples, and specifies the minimum number of consecutive samples that must be "on the rails" to be considered clipping. Note that a clip indication doesn't guarantee that peaks were truncated, it just means it's likely, particularly if the threshold is large. To disable meter clip detection, set the threshold to a huge number.