These levels refer to the relative strength of the signal carrying the audio information within an electronic circuit. These levels are expressed in units of decibels (dB), which is based on the voltage of the signal as compared to a reference voltage.

"Line level" generally refers to a signal strength between +4 dB and -10 dB. Most professional-level audio gear (e.g., power amps and signal processors) is designed to work with this level of signal for both the input and the output.

"Instrument level" is a much weaker signal at about -30 dB. This is the level of signal that is produced by the pickups on a guitar or bass.

"Mic level" is weaker still, about -50 dB. This is the level of signal that is created by the microphone.

Obviously, a guitar or microphone does not generate a strong enough signal to be accepted by professional-level audio gear. This is why preamps are necessary. A preamp takes an instrument- or mic-level signal and boosts it to line level, which can be accepted by pro gear. Many pieces of equipment, such as mixers, have preamps built into them. Guitar amplifiers also have a preamp section that the guitar is plugged directly into. Other situations may require a separate preamp.

Let's look at a simple example:

A typical setup might include a mic plugged into a mixer, which is in turn plugged into a power amp. Why can't you plug the mic directly into the power amp?

Well, since a power amp requires a line-level signal, you can't simply plug a microphone into the power amp. The signal strength is too low. To remedy this, you plug your microphone into a mixer. The mixer has a built-in preamp, which boosts the level of the incoming signal of the microphone to a usable level. Since the outputs of the mixer are line level, they can be plugged directly into the power amp. Alternatively, you could plug the microphone into a stand-alone preamp, which would then be plugged into the power amp.