Here's a tutorial for a very exaggerated wide binding (5½" wide strips) that will clearly show how it works.
http://www.mccallsquilting.com/conte..._WEB_BONUS.pdf
If the seam at the edge of the quilt top is greater than ¼", you will lose part of the top...points, details, overall size, or anything else. There is no need for that to happen.
There are two discussions going on...the original about leaving ¼" of extra batting just to make the standard ¼" binding fuller and the secondary one about leaving extra batting to make wider bindings full without reducing the quilt top in any way.