Here's the problem with totally trusting your ears. Very short clipped events will not last long enough for you to perceive them. So, on one level, that's not a problem. However if lots of events are clipping on lots of channels, at some point it can add up to a "I can't quite put my finger on it, but this doesn't sound right."
 
SONAR has multiple ways to render waveforms so you can look at the waveform itself and see if any violence has been done to it. Personally, I think gain-staging is important and I like to leave headroom. Worst case is I'll need more makeup gain, change compression settings, etc. I try to avoid redness in the PC although if all the sounds seem dialed in and there's the occasional red flash, I don't lose sleep over it.

It's always been my understanding that nothing truly clips until your audio hits your D/A convertors.
 
This doesn't mean you can ignore proper gain staging techniques but most modern DAW software is very forgiving when processing signals purely in the digital domain.
 
Of course, different plugins will react in different ways to hot signals so as always, let your ears be the final judge

Bristol_Jonesey
It's always been my understanding that nothing truly clips until your audio hits your D/A convertors.

 
Well, there are some purists who will not even use the term clipping for a digital over. And it certainly would be possible to maintain extra bits in the processing algorithms so that a 16 bit number is actually represented as 18 or 20 bits. The meters could then be set to read an over at 16 bits but the data is maintained in the padded bits and can be recovered before final rendition. If someone is designing their applications like that, it would be nice if they would document it. But clearly the over does not occur at the AD convertor. If you burn a CD with digital overs, the data over 16 bits is well and truly lost forever in that rendition, regardless of whether you ever play it or not. 

I now leave much more headroom in every track and their respective PC modules... try to avoid peaks anywhere... lots of channels, lots of gain stages... and as we're NOT worrying about noise floors anymore... why go there?  Add all these together and I feel you end up with a less open sounding mix.  In the end, Stealth maxes out the final mix wonderfully...
 
With lots of tracks I feel the end stage sounds much cleaner, more open if track levels aren't run hot.  As Craig was saying, lots of little peaks and multiples add up...
 
I use to mix with hot track levels....Indeed, this was an issue a year or so ago on the board... "we got lots of headroom per track" but when I go back and listen to the end result, those mixes now sound more cluttered or saturated to me so I've backed way off on the levels till the end stage.  Maybe this is due to other things, like learning to mix better or play better or.... but I find no problem with leaving lots of headroom.
 
 

I created and posted this quite awhile back: http://forum.cakewalk.com/FindPost/2880052
 
It's not actually clipping when lighting up.  Hope that helps!

Although red does not indicate clipping per se, it indicates the potential for clipping under certain conditions, like applying effects or bouncing to a track. See below, which shows what happens if you boost a couple EQ stages to +12 dB, and precede the EQ with a CA-2A whose output is turned up high enough to light the EQ's red LED. 
 

 
Although you can often get away with improper gain-staging, sometimes it will trip you up so it's better just to pay attention and gain-stage properly. 
 
Think of the PC red LEDs as temperature gauges on a car engine. When they're pinned to the right it doesn't necessarily mean the engine has actually blown up, but that the engine very well could blow up if you keep driving. 

Anderton
Think of the PC red LEDs as temperature gauges on a car engine. When they're pinned to the right it doesn't necessarily mean the engine has actually blown up, but that the engine very well could blow up if you keep driving.

That's a good analogy that suits the indicators well.

Even if you don't notice a difference it's just good practice to keep all of your PC clip lights out of the red. It's a pretty good gain staging guide. Sometimes I can't hear anything wrong when a track's meter is going into the red but I still keep it out of there anyway.

I think what confuses people is whether that clip light is based on the input or the output of the module. I'm frequently confused about this myself. I'm sure I've been told the answer more than once but I keep forgetting, lol. It may just mean "anywhere within the module, whether input, output or in the middle. By in the middle I mean somewhere in within an FX chain. I sometimes get confused by that ProChannel clip indicator on the console strip, the one next to the PC on/off button. Because that could be lighting red even though the last module in the PC is showing green. What that means is that something somewhere in the PC is clipping.

So for instance you could have 3 effects in an FX chain. The output of the middle effect is clipping, but you've turned the gain down in the last effect so that the input into the next PC module is not clipping. In that situation it may be that the console clip indicator is glowing red, but nothing in the PC itself is red. It might be, if the FX chain clip light worked, but for some reason it doesn't (unless they fixed it without me noticing)?

I try to avoid it using the Gain knob at the top of the track strip and as I mix I always make sure any effects output doesn't ADD gain.
 
Like I watch my track/bus meters and if the original volume was -12db as I add effects I adjust the "output" gain of my effects to only output at -12db... unless I am intentionally adding gain with those effects.
 
HOWEVER, if I start seeing my PC modules going red I will try to tame it BUT if taming it screws with a good sound in a negative way AND I don't hear any negative effects from the clipping I'll try to ignore it (hard to do for an OCD spazzoid but if it sounds good it sounds good and that overides any visula bullpuckery).
 
I do hear the negative effects of a clipping PC module many times though and it is cumulative so I definitely try to deal with it while I'm looking at it. Otherwise it gets buried and I may not realize where the frack some nasty noise is coming from in an ultra thick/complex mix.
 
/not a pro engineer

Beepster
/not a pro engineer

But a credible emulation of one in the previous post