"Is Anchor" is merely "Should layered navigation be on?" - it isn't a setting that needs to propagate down through the category tree.
Whether you want it enabled or not is a judgement call of how your customers interact with your site.
Highest level: Category A (not anchor)
Middle level: Category B (anchor)
Lowest level: Category C (?)
In your example, viewing the landing page for ..
A: Would show a block with direct links (non-param) to the respective sub-categories. It would only display the product grid for products in this category only.
B: Would show the full layered navigation block for the products in both that category and the respective sub-category (C) - irrespective of whether "is_anchor" was true/false in sub-category C.
C: It will either show the layered nav, or not - depending on what setting you pick
A real-world example
Assuming Category B was "furniture" on the Demo store, Category C (bedrooms) could be visible via 2 means:
The first is via the layered navigation itself - and would continue to show the layered navigation irrespective of the fact if Category C had "is_anchor" set to true or false.
Whereas the second link wouldn't show the layered navigation block (if Category C had "is_anchor" set to false).
Typically, if all the categories below and including the top level category (A) cumulatively had 50,000 products in them - your customers wouldn't really benefit from having to trawl through the hundreds of layered navigation options they would see. Similarly - the performance penalty of doing so would be vast.
So people usually provide the first top-level of categorisation to dive down into the respective sub-categories to break this up a little - and provide a more digestible layered navigation.
Some might argue this defies the purpose of faceted search; but its a judgement call between usability and performance
What would we do with the lowest level? Set it to 'anchor' or not?
That depends entirely on how you want the customer to interact with that specific category.