Golly supports up to ten layers. Each layer is a separate universe (unless cloned; see the Clone Layer item below) with its own algorithm, rule, viewport, cursor mode, selection, step size, origin offset, color scheme and name. The current layer's name is displayed in the main window's title bar. Most edit/control/view operations only apply to the current layer.
Note that most of Golly's options apply globally to all layers. This is true for all of the options set in the Preferences dialog. It's also true for many of the options set via menu items, like Save Extended RLE, Paste Mode, Paste Location, Show Grid Lines, etc., but not for any of the Control menu options (Auto Fit, Hyperspeed, and Show Hash Info).
The items at the bottom of the Layer menu show the current names of all the existing layers. The names of cloned layers are prefixed by one or more "=" signs; all layers with the same number of "=" signs share the same universe. The current layer is indicated by a tick. To switch to another layer just select the corresponding item. If a script is running then you can only switch to another layer if the script has called g.setoption("switchlayers",1).
A layer containing a modified pattern is indicated by a "*" at the start of the layer's name. To avoid losing your changes, a "save changes" dialog will appear before creating a new pattern, opening a pattern file, deleting the layer, or quitting Golly. If you'd rather not see this dialog then untick the appropriate check boxes in Preferences > Layer.
Common layer functions are also available via buttons in the layer bar located underneath the status bar. Use the Show Layer Bar item in the View menu to show/hide the layer bar, or just hit the "\" key.
Save Overlay...
Opens the standard file saving dialog so you can save the current overlay image in a PNG file. Note that it's possible to save the overlay while a script is executing.
Show Overlay
If ticked then the current overlay will be displayed (if it exists and if it contains any non-transparent pixels). You can show/hide the overlay while a script is executing.
Delete Overlay
Deletes the current overlay. Unlike Save Overlay and Show Overlay, it's not possible to select this menu item while a script is executing.
Add Layer
Adds a new layer (with an empty universe) immediately after the current layer. The new layer becomes the current layer and inherits the preceding layer's algorithm, rule, scale, location, and cursor mode. The step size is set to 1, there is no selection, no origin offset, and the layer's initial name is "untitled". The new layer starts off using the default color scheme for the current algorithm and rule.
Clone Layer
Adds a new layer that shares the same universe, undo/redo history, and color scheme as the current layer. All of the current layer's settings are duplicated and most will be kept synchronized so that a change to one clone automatically changes all the others. Each cloned layer does however have a separate viewport, so the same pattern can be viewed at different scales and locations (at the same time if layers are tiled). Cloned layers can also have different names, cursor modes, or control options (Auto Fit, Hyperspeed, and Show Hash Info).
Duplicate Layer
Adds a new layer with a copy of the current layer's pattern. Also duplicates all the current settings but, unlike a cloned layer, the settings are not kept synchronized. A duplicated layer starts with the same undo/redo history as the original layer but their histories will diverge if changes are made to either layer.
Delete Layer
Deletes the current layer. The current layer changes to the preceding layer (unless the first layer was deleted).
Delete Other Layers
Deletes all layers except the current layer.
Move Layer...
Opens a dialog that lets you move the current layer to a new position in the layer sequence, where 0 is the position of the first layer.
Name Layer...
Opens a dialog that lets you change the name of the current layer. Note that opening or saving a pattern file also changes the layer's name. Creating a new pattern resets the name to "untitled".
Set Layer Colors...
Opens a dialog that lets you change any of the cell colors used by the current layer and its clones (if any). Note that any changes you make here are temporary. If you open a pattern file or create a new pattern, or if you change the current algorithm or rule, then the colors will be reset to their default values as specified in Preferences > Color.
Synchronize Views
If ticked, then when you switch to another layer Golly will automatically switch to the same scale and location as the old layer. Most of the time you'll probably prefer to keep this option turned off so that each layer has a different scale and location.
Synchronize Cursors
If ticked, then when you switch to another layer Golly will automatically switch to the same cursor mode as the old layer. You'll probably find it less confusing if this option is kept turned on, but it can be useful in some situations for different layers to use different cursors. For example, you might want to make selections in one layer but draw cells in another layer.
Stack Layers
If ticked then all layers are displayed on top of one another, temporarily using the same scale and location as the current layer. The pattern in layer 0 is drawn first (100% opaque), then the patterns in other layers are drawn on top as translucent overlays. The opacity percentage of the pattern overlays can be set in Preferences > Layer. For an example of how stacked layers can be useful, load in a pattern and run the envelope.py script.
Tile Layers
If ticked then the viewport window is tiled into sub-windows and each layer is displayed in a separate tile. Clicking in the window of a non-current layer will change the current layer. Tiling is very handy with cloned layers as it allows you to view the same pattern at different scales and/or locations.