Hi Bruce - these are very good questions.
It's hard to get your head around some of these terms but I'll try to explain. Firstly, it's important to understand that Levels is the distribution of tones in your image from black to white and generally speaking the graph of these tones should fall off at the end points.
If the graph is blocked at the black end, the image is underexposed, you have blocked the shadows. Conversely, if you have a large spike right at the white end, the image is over exposed.
It is by reading the histogram that you would then use your exposure compensation - so if the shadows are blocked add some exposure, you will see as you do this the histogram change. The opposite happens with over exposure.
Always allow yourself some headroom so you can fine tune once you have converted the raw image and move to say Photoshop.
I'd encourage you to make this alot easier for yourself by checking the histogram on the back of your camera, it's a key guide to how you are setting your exposure.
Hope this helps.