I'm just gearing up to write the next two tutorials in the on-going series on how to record. As part of this I was playing back a few recordings that people have posted in GMC - members and instructors. In so doing one thing I've noticed is that a lot of people, members and instructors, seem to like to record 'hot'. That is they like to have their levels at or very close to 0 dBfsd. In quite a few instances recordings are over 0 dBfsd.
Now for personal use/practice and so on it's really up to you what you set your levels at. It's also been fashionable (but not necessarily right) to record 'hot' for sometime now. A lot of people think that recording like this is great because they believe that it makes their mix louder and so it is more likely to stand out from a quiet one.
Notwithstanding the above my advice would be not to record hot - either individual tracks or the mix - prior to mastering. If you record hot you are getting closer and closer to saturation and you may well clip. Digital clipping is not nice. If you want to hear clipping then load up Reaper and go through some of the downloaded takes - quite a few clip: when they do you get some very unmusical distortion. Also if you record hot, whether itb or not, your faders will be closer to the extent of their travel. It's known that faders actually offer better performance in the first part of their travel then at the extreme. Further whether you record itb or not at some stage a mix is summed and recording a lot of tracks hot can result in summing issues.
Also as you approach 0dBfsd you reduce the dynamic range available for adding eq, reverb and so on. Keep in mind that something like eq can be used to increase the gain of a frequency band in a track - if you are close to clipping and you eq gain you will clip. Apart from effects, if you have several individual tracks that are all close to 0 it is possible to saturate and you will end up with a dynamically compressed mix. The closer you get to 0 (or worse exceed it) the less natural your mix will sound.
If you are recording with the intent of producing a CD/MP3 or similar then you will probably send your mixdown to be Mastered. Let the Mastering guys normalise to unity - they almost certainly have better speakers and outboard then you have and probably a lot more experience.
As a suggestion, focused on guitars as its GMC, you should try to set your gain so that your average level is at -10 to -12dB and your occasional peak is at -6. This will provide you with more headroom to add/adjust reverb, eq, gates and so on and you will be less likely to clip/distort and generally saturate your track and mix. (Note- most home studio setups have sufficeint nois floor on a good audio card to do this.) In brief the art of recording is not to produce the loudest recording but one that sounds as good as possible.
The above is just my 2 pennies worth. If you like recording 'hot' fine but I personally believe that a lot of 'hot' mixes would sound better by lowering the gain.