In my own testing, I've found that there's a significantly greater difference between "Recommended" and "Better Performance" than between "Better Performance" and "Best Performance." That's fairly reproducible in both synthetic benchmarks (Geekbench 4 and 3DMark) and actual gaming. I've done less testing in actual gaming because it's just more tedious and time-consuming.
As far as what, specifically, Microsoft is doing with each mode, I think that will remain something of a mystery. I'll note that when I've tested the power drain issue, it doesn't occur in "Recommended" mode, but it does occur in both "Better" and "Best" performance modes, only it's worse with the latter. That tells me that whatever Microsoft is doing, it's only limiting power below the max that the power supply can provide in "Recommended."
So as far as I'm concerned, when I worry about depleting the battery, I keep it on "Recommended." When I'm more concerned about flat-out performance, I put it on "Best Performance." I never bother with "Better Performance" because you don't get much benefit either with performance or saving the battery.
