https://docs.unrealengine.com/en-US/…ser/index.html , talks about streaming and should make it more clear, see:
" LOD Settings
Each level in the world composition can have up to 4 LOD streaming levels. LOD streaming levels are similar to mesh LOD. Depending on streaming distance settings streaming level will be replaced with corresponding LOD level. LOD levels automatically discovered by World Composition using pattern [Package name]_LOD#. Where number should be from 1 to 4. LOD levels can be created manually or with automatic LOD map generator which requires Simplygon.
"
You set the streaming distance,and when applicable depending where player is on map/level the LOD will start,all that dance is about huge worlds and actually making it run without a super computer 
On point,this should get you going ue4 straming LOD tutorial - Bing video .