When it comes to controlling your headphones' audio settings, you have a few options. Many headphones and headsets come with their own in-line controls for muting and volume. If you're using a headset that's designed for gaming, it's especially likely. However, you can always tinker with your audio settings directly from your console, which gives you more granular controls for volume, mixing channels, and mic monitoring. Here's how you can do that, and what each setting means!

Press the "Xbox" button in the center of your controller to open the Guide.
[ Register or Signin to view external links. ]

Scroll to the bottom right of the guide to get to the speaker icon. You can also use the LT and RT buttons (triggers) to scroll up and down quickly.
[ Register or Signin to view external links. ]

Press the "A" button to open the Audio section.
[ Register or Signin to view external links. ]
From top to bottom, the Audio section in the Xbox guide allows you to:

Toggle your headset mic. This mutes the mic on your headphones, if one is present. You can add one if you want, which I go over below.

Control headset volume. This one is pretty straightforward: tinker with how quiet or loud your headphones are until you're comfortable.

Control headset chat mixer. Sometimes you may struggle to hear chat from your Party or friends over a game's audio, or vice versa. You can change the mix of chat and game audio here to suit your needs.
Control mic monitoring. Mic monitoring changes how sensitive your mic is on your headset. If your Party or friends are struggling to hear what you're saying, you can turn up mic monitoring to hopefully help.