I'm not certain how it is supposed to work myself, but you can try the following experiment and see what happens. With advanced settings on:
1. set a reasonably long show duration - anything over 15 minutes should do.
2. set Levels of eroticism to "All levels"
3. set progressive hotness on.

Now, as a model goes through her clips, record the clip numbers in the order they play. The third digit from the right is the hotness level and you can see that in the "Now Playing" section of the "Now Playing" tab. For example I'm watching e0506_6163306.vghd which is hotness level 3 = Nudity. As I understand it, the first clip should be a level 1 if any are available. Each succeeding clip should be the same or a higher level. When the model reaches the highest level for the card, she should start over again at the lowest available level. I may be wrong in assuming the model will always start at the lowest level. I may also be wrong is assuming that two consecutive cards can be at the same level. If you are playing the cards in small mode there will usually be a transition clip like "e0506_it01_999999.vghd" between the regular clips. If you are playing the card in large mode there will be no transition clip. The transition clips have a hotness level just like the regular clips.

Let me know what you observe after 3-4 cards have played. Maybe I can help you figure out what's happening. I've never made a careful study of what happens with progressive hotness on, myself. Maybe I'll do that this weekend.