From Sweetwater.com
When multiple pieces of electronic audio (or video) equipment are used together, the
gain structure of the system becomes an important consideration for overall sound quality. This basically refers to which pieces are amplifying or reducing the signal how much.
A properly set up gain structure takes maximum advantage of the dynamic range and signal to noise ratio of each piece in the chain. No one piece is doing a disproportionate amount of the amplification unless it is a piece designed for that function (such as a mic preamp). An example of poor gain structure would be a setup where a mixer’s master
fader is near the bottom, while all of the individual channel faders are near the top. The resulting level out of the mixer is the same as it would be if all faders were at some mid setting, but the chances of
distortion are much higher because of limited available
headroom in the circuits preceding the master fader, while the S/N ratio of the final output isn’t as great as it could be were the master fader at a more appropriate level. Part of assembling a system with good gain structure is making sure all the pieces can operate at the same reference level. This is where people go wrong combining -10 dBV equipment and +4 dBu equipment. It can work under the right circumstances, but sometimes the resulting gain structure severely compromises the signal to noise ratio of the final result (or in some cases causes it to be distorted).
Gain structure must be considered to optimize any system where levels can be adjusted in more than one place.