The gain is like your sensitivity....turn it up higher for smaller jigs and/or deeper water.
The correct gain setting is wherever you can
just see your jig. If it's up too high, your jig will look huge & the display will probably be cluttered with 'noise'. Too low & you'll lose sight of your bait when you move/jig it.
As far as what is bottom vs. what is a fish....a little practice & you'll know.
Generally, bottom is well defined red band of varying thickness, depending on bottom composition, that doesn't move.
It will remain constant (until you move locations). If you see 'motion' at your bottom mark, it's a bottom hugging fish.
Hope this helps, and remember practice makes perfect.
Enjoy