How does Views contextual filters work?
Contextual Filter is used to filter ,output of the view by URL arguments, also u can pass the arguments manually in this format:

&lt;?php print views_embed_view($name,$display_id,$arg1,$arg2,$arg3); ?&gt;


where "$name" is the name of your view (ex. 'example_view') and '$display_id' is the display type of your view (ex. 'default') and "$arg1,$arg2,$arg3" are arguments just like in URL.

URL arguments has the following structure:

http://example.com/arg_1/arg_2/arg_3 (arg_2 has the path component 2 (in view setting page)).

When the filter value is not availabe: 

it means drupal can't find any filter.

Provide default value:

when the filter value is not available you can use this option to to creat a filter for views output, this filter can be PHP code (if PHP filter module enabled) or it can get it's value from the URL arguments--> (Raw value from url).
The Exception textbox allows you to cheat the value and display all results.

When the filter value is available

in this case you do a validation as your needs and some other options, when drupal can find the filter value.