Sensitivity sets how hard an axis or button is pressed. Cases where you'll want to use it are very rare. 'Flip' inverts a button or axis, making down up and up down. Bindings are sorted first by device, and then by object id. Press the button corresponding to the button/axis you want to bind, and then press the button/jiggle the axis you want to bind it to. Direct Input devices have a prefix of 'DX' ('DI' looks odd), raw devices are prefixed by 'Raw', and Windows messaging devices are prefixed by 'WM'. If you switch input APIs after binding controls, the bindings for the old input mode will be hidden, but will reappear if you switch back. Then just go to the tab for the appropriate pad. To configure bindings, first you need to set which APIs to use for keyboards/mice/other devices.

DualShock 3 controllers are now also supported through direct connections, allowing LilyPad to directly access all pressure sensitive information.

Other devices (game devices, certain extended keyboard keys, etc) are only available through DirectInput, except Xbox controllers, which can work through XInput as well. Only DirectInput provides support for more than 5 buttons on a mouse. DirectInput mode is pull-based while the other two methods are pushed-based. Raw mode distinguishes between multiple keyboards/mice under XP/Vista, but does not support horizontal mouse wheels and won't distinguish between right/left control/shift/alt keys (and doesn't work under w2k and w9x). You must set a keyboard API other than disabled if you want PCSX2/GS hotkeys to work. Windows messaging is the recommended mode for keyboards and mice, though any mode except disabled should be fine for most people.

The modes are: Windows messaging, raw, DirectInput, and disabled. Mice and keyboards both have 4 input modes. The input API sets the Microsoft input API LilyPad uses to read input.

Pcsx2 how to set keyboard controls