Individual blogs can be one of the three levels:
No (blog together or in group): Individual blogs are not used – There are no individual blogs set, everyone is part of a bigger community (depending on 'Group mode' setting).
Separate individual blogs: Individual blogs are used privately – Individual users can only post to and see their own blogs, unless they have permission("viewindividual") to view other individual blogs.
Visible individual blogs: Individual blogs are used publically – individual users can only post to their own blogs, but they can view other individual blog posts.
When "individual blogs" is set, "Maximum visibility" is disabled. I.e. "Maximum visibility" is not relevant to individual blogs and therefore cannot be set.