The levels tool maps a subset of the channel range to the full range, effectively changing the brightness and contrast in one step.

The center point controls the gamma correction, so you can map a biased distribution (mostly bright or dark for example) to be more evenly distributed.

That was the purpose of that step - move the midpoint slider to about where the peak in the histogram is, to get an evenly distributed range.

The low/high slider can be moved towards that to increase the contrast.

"Contrast" here will only apply to the A/B channels, which is the color information, so it's increasing the color contrast and unbiasing it, while keeping the luminance information.

Photoshop also can do the same transform, and interactively in the LAB colorspace (no need to combine/uncombine the channels first).