Why can the volume go higher than 100%?

Starting from 9.10 Pulse Audio merges the sound mixing from ALSA. This has the side effect that you are able to increase the sound level to >100% if you need to. This of course goes on the cost of sound quality as pcm sound will get distorted when overamplified. You can disable this behaviour in PulseAudio if you want.

Or, on Ubuntu > 16.04, whether the Sound Settings control panel volume slider allows setting the volume above 100% is controlled by the following dconf key. Run the following command to disallow setting the volume above 100%. Change takes effect immediately.

dconf write com/ubuntu/sound/allow-amplified-volume false

This setting can also be done from the dconf-editor:

Overamplifying a volume is a good feature, especially for laptops where internal speakers are not loud. I was using this feature since Ubuntu (9.10) on my FujitsuSiemens SI1520. It helped me very much to listen to music. You can even more amplify a sound by using the VLC player where you can gain up 200% of normal sound level :)

I use it when i listen to speeches that were recorded at rather low volume. It might distort music/sound effects etc but it is rather useful in those cases when you just can't listen because of bad recording.

100% is the actual maximum volume - 125 (if i recall correctly) is the volume they thought that would give you loud enough sound without too much distortion.

Most players provide the same feature - smplayer's "max amplification" (with 110 as default) for example