The level of the transformation being applied is relative to the position the viewer is placed on the template in the content tree. For instance, if your main template has the viewer applied on /faqs the /faqs would be level 0 and /faqs/faq-1 would be level 1. In the node the would be level 1 and level 2 respectively.
For the universal and hierarchical viewer, their levels are always relative to where the template is applied.