First Condition:

The below products are what we get from the first set of Settings:

Minimum 5 Products > On Sale > In the Current Category

 The Condition wasn’t met so we move on to the next Settings

Second Condition:

The below products are what we get from the second set of Settings:

Minimum 5 Products > On Sale > In the Parent Category

 The Condition also wasn’t met so we move on to the next Settings

Default Condition:

The below products are what we get from the default set of Settings:

Any Products > On Sale > In the All Categories