From: Vienna, Austria
The manual describes this very well in fact, I reccommend to read pages 217 through 221, they a very educative.
Here is the important part for distinction between DL and MDL:
An MDL of zero indicates the unit has not been spotted by the enemy and is not shown on the
map (enemy bases are always shown on the map even if a base has an MDL of zero nothing
but the name of the base will be known by the enemy). MDL’s above zero indicate the enemy
has spotted the unit. When Fog of War is Off, all units have a minimum MDL value of one. The
greater the MDL, the more is likely to be known about the unit by the enemy and displayed
on the screen.
The greater the DL the easier it is to inflict damage on the enemy in combat. Often even
when the DL is zero, friendly forces will take action due to an MDL value that is higher (i.e.
even though an enemy TF disappears at night, expectations of enemy movements based
on following the enemy closely the previous day can lead to friendly forces anticipating the
enemy’s next move). The DL of every unit changes constantly during the resolution phase
based on the unit’s activities and enemy actions.
And a bit further:
MDL’s go up with the DL value, but they decline at a slower rate than the DL. Whenever any
enemy DL value increases, if the MDL of the enemy is lower than the new DL, the MDL is set
equal to the new DL.
Whenever an event causes a reduction in the DL (including ships with DL’s already at zero)
and the new DL value is zero, the MDL is reduced by one. In this way the MDL can remain a
positive number long after the DL has become zero. However, MDL’s for subs are cut in half
(rounded down) every 12 hours.
So in short, DL is responsible for the ability to bring ordnance on target, MDL is responsible for displaying information about the target, and the ability
to predict a targets´ movements.
I think different types of detection have a different maximums. For subs it appears to be 4, for air it's 10. Then it decays from there.
No, the potential maximums are the same for every unit type: 10. The MDL can be higher than 10 during turn resolution but is adjusted back
to 10 after turn resolution.
What you get the impression that there are different caps on DL from, is that the chance to detect and increase DL/MDL of units can differ.
Subs are very hard to spot, a DD much easier, a CL even more so, and so on.
With subs there is an additional "feature":
Chapter 10.1.2 MDL’s for subs are cut in half (rounded down) every 12 hours.