Clipping can occur at any stage of the chain. Typically however we often refer to amplifier clipping. In this pic, one can see a signal within the linear range of an device, and a signal being clipped due to being pushed outside the linear range of the device.
When we refer to clipping, we mean that the tops of the signal are clipped off and this is when the signal level is exceeding the maximum capability of the amplifier, or any other piece in the system. When the signal is clipped, a loudspeaker isn't being made to move due to it's receiving essentially a DC signal. So all the power ends up heating the voice coil instead of producing motion.
One very important aspect of clipping is while high frequency drivers have less mass than low frequency drivers. This material mass translates into thermal inertia. The higher this thermal inertia is, the more it takes to change the temperature of the mass. This results in HF drivers can heat up much, much faster than LF drivers.
Audibility of clipping varies with depending on which element in your system encounters clipping. Spectral content weighted heavily on the lower octaves can easily clip a LF amp in a HT system. Depending on the design of the amp, some designs will behave nice and predictably when over driven into clipping. Other designs result in oddly spurious artifacts when driven too hard. Compression used during recording or mastering can be a determining factor on how easily a system encounters clipping due to wildly huge peaks associated with some effects or musical signals.
Good luck
Here is a little better pic showing more detail;
