Almost everything I learned about Word's numbering I learned from the Word newsgroups (especially the Microsoft Word Numbering newsgroup) and from the MS Word MVP FAQ site. The contributions of John McGhie (especially his article about Word's Numbering Explained on the MS Word MVP FAQ site) and Dave Rado are significant. The current page represents a mere summary and application of some of that work.
The values for Number position (here called Aligned at), Text indent and Follow number with are in the Position section at the bottom. With multi-level numbering, you also have easy access to settings that control the type of numbering at each level, the characters before and after each level’s numbers (period versus parenthesis), and the list number style (1, a, I, etc.).
One of the harder things to do in Adobe InDesign, surprisingly for a page layout tool, is to create multilevel or outline format numbered lists. The right way to accomplish this, according to the folks at Adobe, is to create a Style for every level of the list you’d like to have! Here are Adobe’s instructions on how to do so (This content is taken directly from https://helpx.adobe.com/indesign/using/bullets-numbering.html#create_multi_level_lists):
I wonder if I’m now up against a limitation of the feature: I have chapter numbers which are large and separated from the main text flow — each in its own text frame on the outer margin. These should be level 1 (‘X’) of the numbering system. Then the next heading (which is in the main body text flow) is level 2 (‘X.x’), and the next level 3 (‘X.x.x’). Unfortunately the level 2 headings do not follow from the level 1 numbering and I wonder if it’s because I’m using separate, non-linked frames for level 1? (The list does have ‘Continue Numbers across Stories’ checked.)
@Aaron: I am stuck exactly with the same problem. I am constructing a style guide document, and thus my content is mainly images, not text. Still I do need numbered chapters in multiple levels, but the automatic numbering seems to be almost impossible as my headings are in separate text boxes. I have tried linking heading text areas, section markers, numbered lists and whatnot, but I am about to revert back to manual numbering instead of battling with this and wasting time! It’s just so devastating, I believe that machines should do what they do best, instead of people keeping track of numbering chapters!