Let's look at this document. It's a nicely organized multiheading document about Colorado tourism with five levels of headings, starting with ChapterTitle, then Heading2, and so on down. The Navigator window is shown here (if you haven't used it, press F5 to show it; it's great).
Outline Numbering is set up to match the intended use of each heading style. Chapter Title is the top level style, and so on. Without Outline Numbering being set up under Tools > Outline Numbering, we wouldn't have the Navigator looking the way it does. Or the table of contents (next) looking like that.
Here's the document's table of contents, feeding off those levels, and showing all five because I didn't restrict it to fewer.
But let's say you want some more power and flexibility. You want something in the TOC that's not in the headings.
For instance, here's a paragraph in the middle that's kind of important. Maybe you just want this one (the heading, not the corresponding bulleted list) in the TOC as well but you don't want to make it a big level 2 or 3 heading.
To do that, just select that paragraph, then choose Format > Paragraph. In Outline and Numbering, select the level you want that paragraph to appear at, in the table of contents. Then click OK.
Then update the table of contents, and you see that paragraph.