There are several factors to take into account.
If you are recording an audio signal, staging is vitally important to ensure the best noise to signal ratio.
However, once the signal has been recorded, it is stored in your DAW as a series of numbers.
In the early days of digital audio for technical reasons (e.g memory, processor speed, maths operations etc.) the resolution was limited. From 8, to 12, to 16 bits. As computers became more powerful audio could be stored and processed at 24bits, and even 32bits or more.
Each increase in bit size gave you a greater range i.e more bits > more steps > more dynamic range. You jump from 255 steps and ~48dB at 8bits, to 4,294,967,296 steps and ~192dB at 32 bits - which is not far off the maximum loudness range ~210dB.
But no matter how much dynamic range you have you still need to be careful not to go over the maximum possible resolution. You also have to be careful when adding gain (multiply), reducing gain (divide), or mixing (adding) to avoid rounding errors and exceeding your maximum 0dbFS ceiling.
But what if you could you increase your audio resolution without the above pitfalls? The good news is that you can - by using some clever binary and maths manipulation.
We'll stick to 32 bits integers. Instead of storing an integer as a single value, you can divide the 32 invidual bits to represent different parts of a number, similar to scientific notation when dealing with very large of very small numbers. There are many ways of doing that, but one of them is by using a floating integer.
In our example we'll divide our 32 individual bits as follows:
- a sign for + or - (1 bit)
- an exponent (8 bits)
- a mantissa or floating point value (23 bits)
This gives you an incredibly large range of possible values. You jump from a range of 0 to 4,294,967,296 for a fixed 32 bits integer, to a range of ~1.2 x 10(-38) to ~3.4 x 10(38) values which is incredibly large! In terms of dB range it works out at ~1528dB!
It is also a signed range so you can go from hugely negative to hugely positive values. Even if your recorded signal hits its maxinum dB range in 32 bits integer ~192dB, you can still increase or decrease its gain by ~770dB of headroom!
Of course, when you output your end signal to an audio file, it will be scaled down to whatever format the file uses, but in the intervening stages in your DAW you won't have to worry about distortion.
Regarding FXs that have a "sweet spot", they are generally modeled after analogue pieces of equipment which distort if you overload them. If the internal resolution of the FX uses fixed integers, they will still distort the signal - but this is usually done by design and for aesthetic choices.
https://en.wikipedia.org/wiki/Audio_bit_depth
https://www.hdvideopro.com/columns/audio-assist/what-makes-32-bit-floating-point-audio-powerful/