The definitive Esri document on coordinate domains is the Understanding Coordinate Management in the Geodatabase whitepaper. Basically, the geometry management library stores all coordinates in a compressed integer form which allows for fast, efficient topological comparison. The domain properties provide details on the way that compression manifests. The minX/minY values form the lower-left (SW) corner point past which no mapping can occur (not even search circle construction). The maxX/maxY are also hard limits (NE), but are likely to be impossibly far from actual data, unless the XY resolution is ridiculously fine (e.g. Ångströms). Within those corners, all coordinates are snapped to the nearest resolution value (and the compressed values are less efficiently compressed as the resolution gets smaller).
Coordinate domains are immutable -- they cannot be altered after the data table is populated. They must be established at feature class creation time. I override the defaults all the time, but I found assembly language to be an intuitive way to write code.
The easiest way to leverage custom domains in the Pro UI is through a feature dataset. Create your FD with the desired tolerances, populate new feature classes in the FD, then immediately remove the FC from the FD (to avoid locking issues associated with feature datasets).
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