The Layers palette shows a list or tree of all the layers in the current frame:

Tools

A tool bar at the top of the Layers palette contains tools for the most common layer commands:

New Layer - creates a new global or local layer.

Delete Layer - deletes the selected layer.

Duplicate Layer - makes a complete copy of the selected layer.

Merge Down - merges the contents of the selected layer into the layer below it.

Merge Contained Layers - merges the contents of all layers nested under the selected layer into the selected layer.

Columns

The columns shown for each layer in the Layers palette include:

• The visibility indicator . This is shown for visible layers. Clicking it makes the layer invisible; clicking the same spot again makes an invisible layer visible.
• The tree expand/collapse buttons . Use these to show and hide nested layers.
• The layer icon, indicating the layer's type and whether it's global or local. Spot-color layers are indicated with a single-colored box , full-color layers with intersecting color circles , and vector layers with a small representation of the contained vector type . Global layers' icons have a bold border around them .
• The layer name. The Base layer is in italics.

Nested layers are indented under their parent layers.

Using the mouse

Clicking on a layer selects it. All drawing affects the selected layer: natural-media tools draw onto it, and vector tools create new vector layers under it. All Layer menu commands operate on the current layer.

Right-clicking a layer opens a context menu of commands that operate on  that layer, similar to the main Layers menu.

You can drag and drop layers in the Layers palette to reorder or nest them.   The drag indicator is a small triangle, sometimes accompanied by a line, that shows where a layer will end up in the list if you release the mouse. In this example, the "street" layer is about to be moved so it comes after the "sketch" layer:

And in this example, the "guy-fill" layer is about to be nested under the "street" layer: