A loop plays dry, then with reverb at a fixed mix, and you estimate the decay time. Reverb is easy to add and hard to judge, and hearing the actual length of a tail is what lets you choose a space on purpose instead of by preset name.
At level 1 the decay is between 0.25 and 1.5 seconds and the margin is wide. Level 2 extends the range to 0.2 to 2.5 seconds, and from level 3 any decay from 0.15 to 4 seconds can come up while the margin keeps tightening. Very short decays are often the hardest, because they sound more like room color than like reverb.
Listen at the gaps: the end of a phrase, the space after a snare hit. That's where the tail is exposed. Counting it against the tempo also helps, since a beat at 120 BPM lasts half a second.
Because we hear decay in proportions. The difference between 0.3 and 0.6 seconds is as obvious as the one between 2 and 4 seconds, even though the second gap is much bigger in absolute terms.