Does the gain affect haw many watts an amp puts out? For example if i had a 800 RMS amp and had the gain at half would it only produce 400 RMS? Or am I just retarted.
No, it simply matches the level of the amp to the head units preout level. Head units have different preout levels (voltages and impedance), and the amp has to be set to match this (if you have a 4V preout head unit, the amp has to be sensitive to 4V, likewise with a 2V or 8V preout). Simply put, when the head unit's volume is set to 1/2 volume, the amp will also be at 1/2 volume with properly set gains. If the gains are set properly to the head unit, then it'll get 800 watts regardless of how they're set, as long as they're matched correctly.