Here's what I suggest you try: turn your guitar volume to half, and guitar tone control all the way up. Now, turn your amp volume up to a normal playing volume, without regard for the numbers on the knob. One of the first things you'll notice (especially with Fender guitars and amps) is less harsh treble. This is usually a good thing and here's why it happens: the resistance of the volume pot is acting as a low-pass filter, attenuating high frequencies and smoothing out the sound. It's less drastic than the tone pot and keeps the all-important middle frequencies intact.
Now, let's roll back the tone control back halfway. The signal will lose highs, mids, and perceived volume. Not too worry, this is just our starting point. (At this point, you'll probably want to just turn up your amp just a touch more.) Start turning your guitar volume up and your tone control down. You'll see that you get a fat sound at normal volume that will usually overdrive the amp, approximating that creamy 50's archtop honk. Cool, huh?
Next, let's go the other way. As you turn down your guitar volume and turn up the tone knob, you'll notice the sound cleaning up nicely while still retaining enough volume for crisp rhythm tones. You can always goose the volume a little for solos, but be considerate of your audience and bandmates - your rig has more potential now and with that power comes great responsibility!
To recap, your guitar's knobs are much more than window dressing; they're interactive tone sculpting tools with myriad textures available at your fingertips, especially when combined with multiple pickups and a juicy amplifier. Don't be afraid of extreme settings! Once you know everything your guitar's capable of, you can adjust to taste and find your sound. Now go out and have some fun!