It refers to any situation where 2 or more cards with the same level are found when looking at all of the stacked cards. Example situations include a level 5 Digimon with a level 5 digivolution card, or a level 6 Digimon with 2 level 5 digivolution cards.

Yes, both have to be XX.For example, "1 level 4 or lower Digimon card with the [CS] trait or that is yellow or black" means either "1 level 4 or lower Digimon card with the [CS] trait" or "1 level 4 or lower Digimon card that is yellow or black." In both cases, the card must be level 4 or lower.