Differences Between Application Failure, Automation Failure, Warn and Continue, and Warn and Continue with Sub Steps Error Threshold.

Thresholds can be adjusted on each test step to control what happens when that step fails to execute.

The highest level is Automation Failure.  This is the default for any new step in a test.   If a step set to this level fails to execute, it will immediately stop the test at that step and report that the test fails.

The next level would be Application Failure. You should set important verification steps in your test to this threshold.  When a step with this fails to execute, the test will immediately stop and report an application failure.  You can capture the application error and report it as such, allowing distinction between Automation Failure and a real, or Application Failure.

The next level down would be Warn and Continue.  As the name implies, a step that fails while set to this level, will not stop.  It will flag that step as a warning, and continue executing subsequent steps.  This is useful for conditional testing such as checking for the existence of a popup dialog before taking the actions necessary to dismiss it.  Any SUB step(s) that fail will cause a step failure, bypass the parent's warning, the test will stop immediately and fail.  In short, the Warn and Continue only applies to the step, not the sub steps aka. conditional steps.

The last level would be Warn and Continue with sub steps.  Much like the previous threshold, a failed step only generates a warning, and the test steps continue sequentially.  The difference here is that the sub steps will also adhere to the parent's warning only level.  Therefore, any step failure in a sub step will not fail the test, but simply generate a warning.