It's very easy to think that the list level is determined by the indentation from the left margin. While that's the default behavior of a lot of lists, some do not have different indents for different levels (see Figure 1).
If you want to change the amount a list is indented from the margin, do not use the TAB key or the Increase Indent button. This creates new list levels, so although it may look right, when you try to create a new list you'll have all your levels mixed up. Instead, right-click the list and then click Adjust List Indents. In the dialog box that appears, you can change the indent of both the bullet or number and the text.