So if the source is same and the loudest you want to play is 50% of volume knob with that fixed source, the amp will distort or clip just as much as at 90% volume knob?
FYI I'm an ME, not an EE, and sorry if my rule of thumb is bunk.
It just means that the position of the volume control, all by itself, in isolation, has nothing to do with distortion or likelihood of clipping.
The volume control itself is just a voltage divider. It does not amplify. It can only attenuate.
If you apply a small signal to the volume control input and adjust the control to 50%, the output from the volume control is going to be made smaller.
If you apply a monstrously large signal to that same volume control (feeding the same amplifier stage as above) and adjust the control to that same 50%, the output from the volume control is going to be smaller than it was at its input, but still could be much larger than in the previous example, and perhaps enough to overload or clip the following stage.
Here's an example.
If the volume control is set to attenuate an incoming voltage by 10X (-20dB) then:
1) an incoming 100mV signal will be attenuated to 10mV.
2) an incoming 10V signal will be attenuated to 1V.
Let's say the amplifier following the volume control reaches full power with a 500mV (0.5V) input level.
So, with the volume control at the same exact physical setting:
The example in 1) will not come close to clipping or overloading the following amplifying stage, but
The example in 2) will drive the amplifier far into overload and clipping, with high distortion at its output.
Does that make sense?
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In example 1) above, if the incoming signal is 100mV, and the amplifier after the volume control can accept up to a 500mV signal without clipping, that means you could turn up the volume control all the way to 10 (100%) and it would pass 100mV to the amplifier input. Since the amplifier can accept up to 5 times that signal level without clipping, turning the volume control up all the way will not cause the amplifier to clip/overload.
In this case turning the volume control up to maximum does not cause gross distortion at all.
Which is all a long winded way of saying that the volume control only adjusts *relative* signal level. It's the amplifiers that distort. If you keep signal levels below overload thresholds, there will be no distortion.
It all depends...