Headroom is simply having more power than you will need. Powering a 25 watt rms speaker with a 100 watt rms amp leaves 75 watts of headroom. If that amp is putting that 100 watts rms out with .005% THD. Imagine what the THD is if the amp is only putting out 15 watts. Probably not measurable at all. Definitely is not audible. So there is plenty of headroom for distortion also. Which is the important one really.