In a 2D program like Photoshop or Illustrator, the concept of layers makes a lot of sense: You can have content on any number of layers, sort of like a stack of transparencies. You find a distinct order to your layers, so anything on the top layer is visually in front of everything on all the other layers.
But hold on a second — SketchUp isn’t a 2D program; it’s a 3D program. So how can it have layers? How can objects in three-dimensional space be layered on top of each other so that things on higher layers appear in front of things on lower ones? In short, they can’t — it’s impossible. Layers in SketchUp are different from layers in most other graphics programs, and that’s confusing for lots of people.
SketchUp has a layers system because some of the very first SketchUp users were architects, and many, many architects use AutoCAD drawing software. Because AutoCAD uses layers extensively, layers were incorporated into SketchUp to maximize compatibility between the two products. When you import a layered AutoCAD file into SketchUp, its layers show up as SketchUp layers, which is pretty convenient.
So what are SketchUp layers for? Layers control visibility. Use them to gather particular kinds of geometry so that you can easily turn it on (make it visible) and turn it off (make it invisible) when you need to. That said, layers don’t work the same way as groups and components; your edges and faces aren’t isolated from other parts of your model, which can cause major confusion if you’re not careful.
