What is nits?

In plain language

Standard dynamic range video assumed roughly 100 nits. HDR content is mastered far higher — commonly 1000 nits, sometimes 4000. A good OLED television peaks around 800 to 1500 nits on a small window; a projector reaches a fraction of that.

Why it matters in your setup

The mastering figure is guidance, not a demand. It tells the display: this scene was graded assuming this much headroom. The display then tone-maps down to what it can actually produce.

Which is why the number you declare matters. Tell a source your display handles 4000 nits when it manages 600 and highlights arrive clipped. Declare something realistic and the mapping is gentler and better judged.

For LLDV the default of 1000 nits for maximum luminance suits most systems.

What the DR HDMI 8K does with it

In the DR HDMI 8K's Dolby Vision data block builder you set maximum luminance anywhere from 100 to 10000 nits and minimum luminance from 0 to 1, plus a backlight minimum luminance of 25, 50, 75 or 100 nits. Those are the values a source uses to decide how to tone-map, so they are worth setting deliberately rather than leaving at whatever came through the chain.