In traditional cel animation, the artists would paint their animations onto clear sheets of acetate. These clear sheets would often contain a single character or element. They could then be laid together with sheets containing other characters and backgrounds to create a composited scene.
Layers work the same way. Each layer can contain discrete elements of your design. You then combine these to create the finished product. Layers can contain photos, text, logos, shapes, and even textures. There are lots of ways to create and manage layers, but it all comes back to having an organized design. Every layer should have a clear, descriptive name to make your design work easier.