There are three types of document files that can be in your manuscript: folders, document groups, and single documents. Folders have that blue folder icon--that's the top row in your compile formatting pane. Document groups (documents with subdocuments) have an icon that looks like a stack of two papers. That's your second row here. And single documents (docs with no subdocuments) just look like a single piece of paper; that's your third row.
What you're doing here is defining how each type of document should be formatted. The "Level 1+" refers to where in the binder hierarchy the document exists. So for example, if your binder looks like this:
When you choose to compile "Draft," the compiler will consider both your folders as being at Level 1; Documents a and b and DocGroup c are Level 2 (they're children of a Level 1 folder; visually you can see the indenting in the binder or in the Content pane of the compiler) and Document d is Level 3 (a child of a Level 2 document group). In some cases, you might want to format a file at Level 1 differently from the same file type at Level 3, for instance, so in the compile formatting pane you have the option to specify this. Next to the "option" button at the top of the pane you'll see a little square button showing a + and a couple lines (marked with the blue square in the first image above)--that's the "add another formatting level" button. If you have the folder Level 1+ selected and click the button, it will change the first folder to simply "Level 1" and add a new row for folder Level 2+. The plus sign indicates that the formatting you set for that row will apply to all folders at Level 2 on up (up numerically, although technically you're going deeper into sublevels, so I really want to say "down" there but I thought it'd be even more confusing). So all Level 3 folders, Level 4 folders, Level 5 folders, etc. would take the same formatting that you set for Level 2.
So. You probably don't really care about all that if what you want to do is just give your compiled project the same font everywhere. In your case, if you have only three rows, all Level 1+, then you're just setting the formatting for each document type and that formatting will be applied to that type for every level. If you're not even compiling anything in a specific type, you don't have to worry about setting it, although just doing the copy/paste with the formatting is fast and won't lose you anything.
Did that help at all or just make everything more confusing?