Andy will know more, and probably correct me in a few places

, but here's a quick outline of what I know:
The u360 internal senses the stick position in 14 bits per axis. It sends 8 bits per axis to the computer (the standard for analog). Changing the scale value doesn't change the 8 bits per axis (aka increments); it changes how the 14 bits are converted to 8 bits.
It's easy for me to picture that the value corresponds to a "radius" that covers the 8 bits sent to the computer: the bigger the value the bigger the "circle" of the 14 bits will get converted. (I',m quoting because I think it's really a square, but circles are easier to picture.) How this is calculated, I don't know.
Since it's being converting inside the u360 by the firmware, I doubt the calculation is too hard. But I'm just as curious on how the value is used in the convertion as you are.