Near the bottom of the Inspectors along the right edge of Observatory’s window, is the Layers panel. It has a disclosure button at its left which, when clicked, reveals and hides the panel. The click area actually covers the whole panel’s title bar, so you don’t have to be too accurate when clicking. Alternatively you can choose View ▸ Inspectors ▸ Show/Hide Layers.
Layers are like sheets of stacked tracing paper. You can see through transparent areas of a layer to the layers below. You move a layer to position the content on the layer, like sliding a sheet of tracing paper in a stack. You can also change the opacity of a layer to make content partially transparent.
Layers are composited together to form a single image which shows up in the Editor.
The Layers panel in Observatory lists all layers in an image. You can use the Layers panel to show and hide layers, select and rename them, and lock or unlock them. You can access additional commands and options in the Layers menu as well as the Layers panel action menu.
The Layers panel also is used to select the Active Layer. Information in the Editor Bar, the Measure Inspector, the Layer Adjustments, and many other operations in Observatory always act on the Active Layer.