For the electronics chain, this would correspond to the output level above the noise floor but below saturation (clipping) where it is operating as linearly as possible.
Sound volume is a result of air pressure, the magnitude of which will depend on transducer sensitvity and its own limits to clipping and dynamic range.
For the perception, the ear contracts and expands, much like your iris with light, based on the amplitude of sound. Your brain is exceptionally capable of adjusting your perceived dynamic range and giving you useful sound details whether that is from an accoustic chamber or a battlefield.
Relatively speaking we generally prefer louder sound when given the choice (below a hard pain threshold). With age, the responsiveness of this mechanism reduces and you'll get differences in opinion on ideal volume, with the older folks telling the young kids to turn down that darn racket... Despite not hearing as well, older ears can't auto attenuate the sound like youth can.
Does that answer your question? Hope it was atleast entertaining :)