The red dial is the water level valve. The more that valve is closed, the wetter it will skim. The black/grey valve is the needle wheel pump's adjustment. That valve controls how much air the skimmer brings in from above. The red valve should be turned so that the water level is just at the red ring (where the o-ring is). The black dial should be about 50% closed or where microbubbles are rising to just below the base of the inverted cone in the collection cup (kind of the neck of the skimmer). Let it run like that for a few days to break-in the unit and then adjust them from there to how you want the unit to skim (wet v. dry). However, the black valve should remain fully open after the break-in period and you should only use red dial from there to adjust the water level in the skimmer. Yes, you should see waste accumulate and your collection cup may fill up fairly quick during the break-in and then slow down once it settles down.
Skimming dry (red dial is more open), the water level is set lower in the skimmer (micro bubbles are just rising into the inverted cone). Wetter skims require higher water levels (red dial is more in closed position) with micro bubbles rising to about 1/2 way up the inverted cone. As waste is captured the micro bubbles will carry the waste to the top and the microbubbles will become larger creating a foam head. Those larger bubbles will be the one carrying the wate on their surface and will pop once above the cone and the waste will fall into the cup.
