When you open Levels, you see a something like a two dimensional mountainscape, aka a histogram. This tells you how much of any specific shade of grey is used in your image: the higher the peaks, the more of that shade is used in your pic.
Black can be found on the left, and white on the right. Between these you have our shades of grey.
Under the histogram you see three sliders. Any shade that is to the left of the leftmost one is forced to pure black, and any shade that's to the right of the rightmost one is forced to white. The middle one darkens or brightens the shades between white and black. Try this on a greyscale image, and also on a coloured one by dragging the three sliders one by one.
When, for example, your histogram does not fill the entire range from left to right, your image lacks darkgreys to black, and/or lightgreys to white. By dragging your leftmost and rightmost sliders, you can force the existing shades to expand to the full range going from black to white, but you pay a price: the shades you have are torn apart and some will even have to disappear because you only have a limited range to start with*. When you apply levels, and then open the levels box again, you will see the gaps in the histogram, indicating the missing shades of grey.
And now we come to the point. Suppose your image does not contain really dark greys/black or lightgreys/white. You decide to slide, but of course you do not want to lose detail. Therefore you do not want to slide too far with the black and/or white slider.
Photoshop has a trick for this: when you hold down the Option/Alt key when you slide, the image changes.
When you option/alt slide with the leftmost slider (the black one) your image becomes white. This means that there is no black in your image. Now when you slide to the right and you reach your histograms leftmost end, you will see tiny black spots appear. From this setting on, you are forcing shades of grey to darken and to black. Try sliding until you see a noisy kind of pattern in the areas of black.
Do the same with the white slider. Hold down Option/Alt and slide. Your image becomes black, and when you reach the right edge of your histogram, you see white dots appear. Slie until you also see a noisy kind of pattern.
* (the asterix):
When your scanner software has a levels setting, you can better use this than the Photoshop one. Not because it's better, but because Photoshop has to work with the material that's available, and therefore is forced to create gaps when you tear the greyshades apart. Your scanner is more lucky: you make a pre-scan, adapt your levels to full-range, and then your scanner can start from the original material to create a full-range image for Photoshop.
As an extra: remember the other tip: to reset to the initial values, you just hold down Option/Alt and Cancel turns into Reset. (Wish I could use this in real life too...)
Have fun.
Levels trick 
Linear Mode
