The user profile work allocation and capacity has four settings, three of which are used for advanced allocation reporting.
Percent Allocation is the one non-advanced setting which does not permit a null value. It is used as a default allocation when adding a resource to a task. In most common resource assignments, it is not an important setting. If you're interested in changing this setting, be certain that you thoroughly understand calculation types.
Advanced settings all use 100% as the default when null. This 100% value is acceptable for most implementations and should be left as default for all implementations which do not manage allocation as a high priority reporting metric.
Utilization Percent is often thought of as a target for resource utilization. For example, a resource should not be allocated to more than 80% of their available work time. The resource won't report as over allocated until going over the Capacity Percent. Target Utilization is on the resource allocation report for comparison of work assignments to this utilization value without showing over utilization warnings (red numbers and bar chart lines).
Capacity Percent is the most commonly managed advanced setting primarily because it is used for over allocation (red) indicators in allocation reporting.
Capacity Percent Max is for allocation warnings via both the scheduling interface and email notifications when exceeded. If warnings are enabled, this setting is most commonly set to a high number such as 125% so that warnings are not sent during schedule changes which often cause over allocation before all of the changes are complete. A best practice is to manage allocation through reporting while changing schedules as opposed to warnings which use this capacity percent max.