A sequence is simply a recorded program that activates the lights connected to each of the controller's channels in a particular order, most often synchronized with music. The art of designing a good holiday light display lies in creating clever sequences that squeeze the most impact out of a limited number of channels.
When planning a light show, one of the first steps is to determine how many channels your show requires and what lighting elements will be controlled by each channel. For example, you might run several strings of icicle lights across the roofline of your house and connect those lights to one of the channels. Then, the controller can turn the icicle lights on or off together as a unit. Or you might put colored lights on a shrub connected to its own channel. Then, the controller can turn the shrub on or off.
There's no reason you can't physically overlap lights that are connected to different channels. For example, you might put a string of green lights connected to one channel on a shrub and place a string of red lights on the same shrub but connected to a different channel. Then, the controller can make the shrub glow green, glow red, or glow green and red at the same time. Or the controller might make the shrub alternately flash green and red, in rhythm with the music of course.
There's also nothing preventing you from connecting different colors or kinds of lights in different areas of your yard to the same controller. For example, you might use red lights on one shrub and green lights on another shrub on the same channel. Then, the controller can turn both shrubs on or off — one green, the other red.
You might even put a string of green lights and a string of red lights on both shrubs, but connect the green string on the first shrub and the red string on the second shrub to one channel and the red string on the first shrub and the green string on the second shrub to another channel. Then, you can create a sequence that alternately flashes the shrub green and red.
Keep in mind that the controller can do more than just turn lights on and off. For example, the controller can cause each channel to fade up or down at any speed you want. If you have green and red lights on a single shrub, you can create a sequence that gradually changes the shrub from green to red, then back to green.
You can also use channels to create the effect of motion in your light show. As a simple example, suppose you set up several strings of light radiating from a central point, like spokes on a wheel. If the lights on each spoke are connected to several channels, you can create the illusion that the wheel is spinning by activating each spoke in sequence.
The possibilities are limited only by your creativity — and the number of channels you have available to you. More channels are better because having more channels lets you create more complicated sequences. If you start with a 16-channel controller, it won't be long before you want to expand it to 32 channels so you can create more creative sequences.