It is good practice to (almost) always Apply the Scale (the only exceptions I can think of, is when you are using a Texture with Object Coordinates, then you need to be aware of what you are doing…,or if you have linked Objects that you want to have different sizes (Scale))
In this case, the Domain is the only one that is really important. When Baking, the Domain takes the shape of the Text Mesh, but because the Domain was Scaled, that fluid is being scaled up by the same amount, making it so huge that it filled the whole Cube that has become the Domain borders, so it looks like nothing happened….
Each Object has its own Coordinate System and Scaling something in Object Mode, scales that Coordinate System. Scaling in Edit Mode, changes the position (coordinates) of the Vertices in that Coordinate System. Applying the Scale, after having Scaled in Object Mode, has the same effect as Scaling in Edit Mode; the Object’s Coordinate System is being reset and the Vertices’ coordinates are being changed, so that the Mesh looks the same after Applying the Scale, as before Applying the Scale.
It’s not easy to explain this in text, but I hope you get a ‘feeling’ for what is happening. No need to understand it completely (yet).
