I believe they're just arbitrary names given to four layers on the calendar. Essentially, it's like you had 4 physical calendars, which were all translucent,and could be overlayed. For example, let's say you're a university student, and you have a specific schedule which is the same every week. One week, you have an appointment which requires you to miss a lecture. Rather than editing the school schedule to make a recurrence exception, you can just assign the appointment event to a higher-level layer, and it will supersede anything on a lower layer.
This is just my conceptual understanding from features I've seen elsewhere - I haven't actually tried it on Seqretary, so I might be a bit off, but that's the behaviour I would expect. Someone correct me if I'm wrong.