How does snapping in QGIS work?

The tolerance of 0.00002 map units is obviously wrong. I have set my snapping tolerance to 10 pixels, which means that a point is snapped to an existing point if it comes nearer than 10 pixels.

With the small tolerance you set you avoid snapping in most cases, unless you are working in a scale of 50.000:1 (not 1:50000!).