The privileges selected on the Privileges tab can override any Access Rights that have been previously set for any user in the privileged group. However, the privileges are not a substitute for Access Rights. If you have not set up Access Rights, you have no security system.
The privileges set on the Privileges tab apply to all objects in all projects in a server configuration. For example, if you give a group the Delete Item privilege, any user in that group can delete any project, view, folder, child folder, or item from the server configuration, regardless of what the Access Rights are for deleting these items.