Hi Sluggy, this is a good question. Let's take a look.

If gain, treble etc. are controlled by the knobs, what difference does the channel(clean, crunch,OD1, OD2) make? The difference is quite obvious when you listen to it, but shouldn't the distortion only be controlled by the gain vs volume ratio? What does the gain-setting change if the overdrive is controlled by the channel?
Sorry for the confusion, I haven't really figured this out yet.
So guitar amps are generally made to give the player a lot of very specific control. Yes, it looks like on this amp you can switch to a Clean channel, which will take out all of the distortion, but, knobs like "gain" can be cranked up so much that it can bring the natural distortion out of your guitar signal.
Gain literally increases the direct signal your guitar is sending to the amp, which, if cranked high enough, can begin to sound distorted. Cranking up "gain" will also increase the volume naturally, since it's increasing the signal.
Unlike Gain which increases the signal from Guitar to Amp, Volume only increases the volume of the amplifier. So whatever guitar tone you're getting, will just sound louder, because the amp is getting louder, but not necessarily the actual guitar's signal. I hope that makes sense.
So with that in mind, if you switch to Overdrive 1 or Overdrive 2, and then crank up the "gain," that will only add a bit more distortion and fuzziness to your guitar's already overdriven tone.
For example if you're satisifed with the amount of crunch you're getting from OD1, and you just want the amp to be louder, increase volume. But if you want to adjust the level of crunchiness from your OD1 channel, then you can play with the gain knob.
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I unfortunately don't know a lot about the G7! Perhaps another user will jump on here.
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Best,
Billy