I used to be confused by headroom....until earlier this year to be fair.
I have several amps, but my favourite amp is my (Omega Amps modified) Fender HR Deluxe (plus cab).
It does a great Fender clean sound (and Marshall, and Dumble), but it's unlike any other amp i've heard. Other amps sound compressed, but on the Fender setting, this amp has an amazing sparkling free sound, incredibly open - but backed up by serious guts. If you play is softly, the amp sounds wonderful, and if you whack the strings, the windows pop out of their frames. It sounds BIG!
It delivers over and above anything else I've tried - and is a million miles away from the FHR Deville (4x10) i had prior to that - even though they're based on roughtly the same circuit.
So, that cavenous open sound, with huge scope for gentle picking and window smashing attack (without touching the volume knob) - what is that called? I used to think that was headroom, but i've known for some time that it isn't.
The love of money is the root of all evil.....damn, I could use some really rather naughty right now.....