About Layers
Layers allow you to work on one element of an image without disturbing the others. Think of layers as sheets of acetate stacked one on top of the other. You can see through transparent areas of a layer to the layers below. You can change the composition of an image by changing the order and attributes of layers. In addition, special features such as adjustment layers, fill layers, and layer styles let you create sophisticated effects.
Transparent areas on a layer let you see through to the layers below.
A new image in Photoshop or ImageReady has a single layer. The number of additional layers, layer effects, and layer sets you can add to an image is limited only by your computer’s memory.
Layer groups help you organize and manage layers. You can use groups to arrange your layers in a logical order and to reduce clutter in the Layers palette. You can nest groups within other groups. You can also use groups to apply attributes and masks to multiple layers simultaneously.
About the Layers palette
The Layers palette lists all layers, groups, and layer effects in an image. You can use the Layers palette to show and hide layers, create new layers, and work with groups of layers. You can access additional commands and options in the Layers palette menu.
Photoshop Layers palette

To display the Layers palette, choose Window > Layers.
* To use the Layers palette menu, click the triangle in the upper right corner of the palette. It contains commands for working with layers.
* To change the size of layer thumbnails, choose Palette Options from the Layers palette menu, and select a thumbnail size.
* To change thumbnail contents, choose Palette Options from the Layers palette menu and select Entire Document to display the contents of the entire document. Select Layer Bounds to restrict the thumbnail to the object’s pixels on the layer. Select the * Show Group Thumbnails box to show a composite image of the group rather than the group icon.
* Turn off thumbnails to improve performance and save monitor space.
* To expand and collapse groups (and layer sets in ImageReady), click the triangle to the left of a group folder. See To view layers and groups within a group.
To create a new layer or group
A new layer appears either above the selected layer or within the selected group in the Layers palette.
Do one of the following:
* To create a new layer or group using default options, click the New Layer button or New Group button in the Layers palette.
* Choose Layer > New > Layer or choose Layer > New > Group.
* Choose New Layer or New Group from the Layers palette menu.
* Alt-click (Windows) or Option-click (Mac OS) the New Layer button or New Group button in the Layers palette to display the New Layer dialog box and set layer options.
* Ctrl-click (Windows) or Command-click (Mac OS) the New Layer button or New Group button in the Layers palette to add a layer below the currently selected layer.
Set layer options, and click OK:
* Name Specifies a name for the layer or group.
* Use Layer Below To Create Clipping Mask This option is not available for groups.
* Color Assigns a color to the layer or group in the Layers palette.
* Mode Specifies a blending mode for the layer or group.
* Opacity Specifies an opacity level for the layer or group.
* (Photoshop) Fill With Mode-Neutral Color Fills the layer with a preset, neutral color.
SOURCE: PHOTOSHOP ONLINE HELP
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