Clipping is when you reach the output limit of the amp and it starts putting out DC (the top of the waveform is clipped off or flat). In addition to sounding bad, this can cause overheating of the driver coils, which can quickly destroy the small coils of a tweeter or mid-range (drivers aren't designed to handle DC). Since woofers typically have much more massive coils, overheating is not as big of a problem but clipping should still be avoided. As others have mentioned, if you set up the system properly, clipping will be minimized.
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