this has been explained numerous times, twice by Tony iirc before the unit was released to the public and by me earlier in the thread
40hz and 1000hz are the fundamental frequencies the unit detects, anything besides those frequencies will light up the dd-1 and it takes 1% distortion or more for the LED to become fully bright.
this is why he repeatedly says the DD-1 does not detect clipping, it detects TOTAL HARMONIC DISTORTION.
THD = sum of harmonic power/fundamental power
in this picture you would add up all the signal db coming from frequencies above 40hz (high order harmonics) and divide it by the fundamental freuquency 40hz signal db to determine THD. i would guess pictured is between 5-15% distortion without measuring