A 165 Watt panel will not deliver 165 Watts max. Its power depends on temperature and sunlight intensity, and no part of its design will stop it from producing more than its nominal rating in abnormal conditions. The nominal ratings of panels are based on performance at standard test conditions, which is the nice round number of 1 kW/m^2 representative of typical peak sunlight, and 25 Celsius cell temperature. If you have a glare-assist for the sunlight, you could get intensity in excess of 1 kW/m^2, which is why the NEC prescribes the first 125% safety factor on source circuits derived from the panels directly. Current-limited devices, like optimizers and inverters, don't require the first 125% factor, because the device would limit its output if there were a "super sun" of irradiance available. These devices can steer module voltage away from the sweetspot, and leave "sun on the roof", to avoid exceeding their limits.
SolarEdge's power optimizers are devices that reformat the mix of voltage and current, so that they can be connected in series, all produce according to what is available at the module level, and localize the losses to only the shaded panel. I.e. prevent it from hindering performance of the fully lit portions of the string.
The second 125% factor is the continuous load factor. It has to do with the fact that heating is part of the mechanism for tripping a fuse or breaker. Carrying full load for extended time (3 hours as the NEC specifies) heats up the fuse/breaker, making it more likely to nuisance trip before it gets to its rating of current. The continuous load factor applies, to mitigate this risk.