Objects LOD affects the quality of the draw for generic buildings and your aircraft depending on your camera distance. I’m saying that at 10 Objects LOD, your aircraft will show as very basic model with blurry livery and missing details. On my A320, the radar dome and the small pilot tube and stabilisers are missing. So it looks like a plain smooth tube on the fuselage with wings.
Generic Buildings are also affected too, I can see in my gate that at 10 LOD, my terminal building is a simple cube with no windows texture on them. I add the LOD a little, then it renders the windows texture. I add some more, it adds roof details. I maxxed the LOD, it shows the Aircon objects on the roof and looking at different directions shows consistency to all the buildings within your field of view.
Terrain LOD affects the mesh detail and quality for the terrain itself. The lower the LOD, the more flat and less detail the terrains would look like. So mountains may just look like a smooth bowl. But on 200 TLOD, you’ll see that the terrains has much more detail on the terrain curves on higher altitudes.
They’re all affect FPS of course, so if you reduce either LOD to get better FPS and you feel that you can live with the compromise. That’s your sweetspot.