Level Sensor Value Chart

 
Values associated with party level:
 
Levels
Values 
1 - 5 1 - 499
6 - 10 1 - 999
11 - 15 1 - 2,999
16 - 20 1 - 4,999
21 - 25 1 - 9,999
26 - 30 1 - 19,999
31+ 1 - 999,999
 
Basically this means if your party is level 1 to 5 all items valued at 500 or higher would be removed from a Chest or Monster Drop List.  If you are level 6 to 10 all Items valued at 1,000 and higher would be removed, on so on until the party reaches level 31 and is eligible for any item in the game since none have a value over 1,000,000. 
 
If a level sensor is "off" you have a chance to receive any Random Item the Chest may contain or the Monster may drop. If the level sensor is "on" your party will need to be a certain level if you want a chance to get the higher quality Random Items.
 
Note: Chest contents are set the first time you enter the map where the Chest resides. This means if you are level 1 entering Arnika, all the Chests with level sensors "on" will only load items less than 500 gold pieces in value. Leaving the map with the Chests unopened then returning at a higher level category doesn't do much other than remove the least expensive item from the chest.