A page can have pages
Depth is free. Any document can hold documents, and the URLs follow.
A page can have pages
This entry has children. Scroll past this prose and you will find them listed β that list is the editor's own, and every prose page on this site has it.
Nothing special happens at depth two
A child of an entry is a document like any other: its own URL, its own prose, its own children if it wants them, its own row in the search index. The slug follows the tree, so a page moved somewhere else gets a new address and keeps answering on the old one.
That is the whole reason this module has no "section" or "folder" concept. A folder is a page with children; a page is a folder with something written in it. Collapsing the two removes an entire category of decision from the person writing.
Where it stops being a good idea
Nesting is free to the system and expensive to the reader. The navigation shows the top level, breadcrumbs show the way back, and anything four deep is reachable by search and by very little else.