Re: understanding guitar volume etc,
From an electrical standpoint, the controls on the guitar are variable filters for the signal coming from the pickups. A volume or tone "pot" is a "potentiometer", which if you look at the word, you see most of the word "potential". This is where the word "potentiometer" comes from. It restricts the potential of the signal being fed into it, much like you would restrict the flow of water using a valve (which is what's attached to the knob on your sink or shower/bathtub controls).
The volume control on your guitar determines how much overall signal from the pickups reaches the output jack, while the tone control and its associated capacitor determine how much of that signal's upper-range frequencies (treble) are allowed to reach the output jack.
Other onboard circuits may restrict or enhance treble, bass, or midrange frequencies.
The amount of signal flowing out of the pickup as defined by the volume and tone controls and into your amp from the guitar determines how the amp's circuits react to that signal. The amp's reaction to that input signal influences the amp's output signal, which, along with the design of the voice coil of the speaker, determines how the speaker reacts.
The controls on the amp itself determine the output level of the amp's circuitry as well as whether the incoming sound's bass, midrange, or treble frequencies are further enhanced or further restricted. These are the EQ controls. Every aspect of an amp serves to amplify (multiply) the incoming signal.
Obviously it goes much deeper than that, and can get ridiculously scientific if the right nerd happens along.
However, if you're asking for tips on effective use of the controls on your guitar, the basic use for them is to mix your guitar with the other instruments and not stand out excessively unless you have a solo moment.
There's no universal standard to follow. You can reduce your guitar's volume for rhythms and turn it up for solos. You can set up your amp's controls so the neck pickup is used for rhythm and the bridge pickup is for solos. You can use the neck pickup only for cleans and the bridge only for distortion.
The "why and when you would do any of that" has to be decided by you in the context of what you're playing and according to the tonal diversity of the other instruments.
