You're not seeing a difference because you haven't added any Terrain graphics to your map. The option only applies to Terrain graphics, which is basically the background of the hex (not the entire map, necessarily, but the hexes). I've reproduced your map area below, only adding Grass 2 (Decorative) as the Terrain level on most of the land hexes. Now the two look like:
The Left pic above shows the first option: Terrain graphics drawn over Elevation Level graphics. The Level #s are still shown, but the varying graphics used for each level are not visible; the Terrain graphics dominate, although you still see the "cliffs" indicating changes in elevation. The Right pic shows the second option: Elevation Level graphics drawn over Terrain graphics. This allows changes in elevation to be seen more easily, at the cost of not seeing the Terrain graphics on non-zero elevations. Note hex 0910, at Level 0, which on the right pic still shows the Terrain graphic, and hex 1011, the corner of which is at the extreme bottom right, had no Terrain drawn on it, so the elevation shows in both cases.
Hope this helps.
_________________
Rick
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