Right, this is speaking to RGB reference levels:
If you've ever wondered how to properly configure your Xbox 360 for HDMI output, this is the guide for you.
www.waivingentropy.com
Important:
your TV may not be properly set to handle an expanded color space. If so, you'll lose some amount of contrast in the highs and lows of your picture (as in, if you mismatch, parts of the screen will be 'too dark' and 'too bright' because the upper and lower 5% of brightness get clipped to full white or full black).
Many TV's have a "Black Level" option, configure that alongside your XBOX360's reference levels for the proper look. If it's on auto, you're probably fine. It'll figure it out, probably.
microsoft's / at time weirder way to say "HDMI black level"
The concise version, yes.
To get into it, your XBOX and TV are communicating with one another with packets of data that describe what color each pixel should be. Those packets are sized to contain 8-bits for each of the Red, Green, and Blue channels. 8-bits of data are enough to describe a number that ranges between 0 and 255.
In the broadcast and home-video market, they typically only describe colors using by using a range between 16 and 235. This was primarily to give wiggle room for old TV's (CRTs) to interpret what would be a reliably unreliable TV broadcast signal into a comfortable picture for the household watcher. The modulated nature of home video signals continued the relevancy of this practice deep into the 90's.
They called that a "Legal", "Broadcast Safe", or simply "Limited" range.
90's computer had the benefit of having lots of reliable bandwidth to send video to a monitor, given that they had to have a relatively short cable (usually less then 30 feet) and lots and lots of pins to work with (15 total, on a DB15 VGA connector). So, they decided,
why not use the whole range? 0-255 "Full" Range it became.
Your XBOX 360 was one of the first consoles to use HDMI to send video to a TV, but it was also one of the first consoles to also allow the user to send VGA to a computer monitor. This intersected with a
near total transition from CRT and Projection TV's towards flat-panel LCD displays in the home display market. Nobody had any clue what was really going on, nobody knew where the future was going to land, and Microsoft had to make a decision between making a console that looked good on TV's today or TV's tomorrow.
So, they split the baby: give the option to the user, and set the default for the most likely user scenario that most people wouldn't notice ("limited" range).
