This condition can occur for a number of reasons, but the most common is applying too much gain to a signal.
Clipping is undesirable, as it is an obvious alteration, or distortion, of the waveform.
The audibility of clipping depends upon the degree. We're all familiar with the sound of severe clipping as experienced with a boom box on weak batteries or the typical car radio turned up too high. The common mechanism there is an amplifier limited to modest battery voltage. Light clipping, on the other hand, is much more difficult to characterize. The audibility of light clipping depends greatly on the signal being clipped.