Layers
There are three kinds of layers. There are path layers (the layer Mario will walk on), tileset layers (for placing tilesets) and doodad layers (for placing doodads). In addition, each path object acts as a tileset AND doodad layer, which will be hidden or shown based on the unlock options for the path object. Click and drag the layers to reorder them, or select and use the arrow buttons to move them up or down.
You will only paint or edit the selected layer. Cmd/Ctrl click any object on the canvas to attempt to select that layer (it's buggy). Cmd/Ctrl click any layer in the layer palette to select all objects on that layer.
Tileset Layers
Tileset layers allow you to place tile objects, from the tilesets located in the Tileset folder. To make a new tileset layer, click the new tileset layer button at the bottom of your layer palette, and select the tileset you want to use. Opt/Alt click a tileset layer in the layer palette to change the tileset it uses.
Doodad Layers
Doodad Layers allow you to place doodad objects, from doodads imported in the doodad palette. To make a new doodad layer, click the new doodad layer button at the bottom of your layer palette. When a doodad layer is selected, the doodad palette will appear. You may add doodads in the doodad palette using the obvious doodad adding button - the doodad will be saved right into the map. Doodads can be any size, and unlike tilesets, can be placed anywhere, and animated. Doodads take up a lot more RAM on the Wii than tilesets, so be cautious.
Path Layers
In the layer palette, there is a single layer called the path layer. By clicking on this layer, you may draw paths and nodes. Each path and node is also it's own layer - they will show up in the path layer palette in the bottom right. You may draw either tiles OR doodads on a path layer, by clicking on that layer. Anything drawn on a path layer will show up when the path or node is unlocked, or be hidden if the path or node is locked.
Mario's model on the map will always be placed above the path layer, but below any other layers higher on the list than the path layer.