You can consider AX layers anologous to transparent OHP slides placed on top of each other. Each slide has a name, range and a purpose. In AX 2009, the layers are (low to high)
USR User - Individual companies or companies within an enterprise can use this layer to make customizations unique to customer installations.
CUS Customer - Companies and business partners can modify their installations and add the generic company-specific modifications to this layer.The layer is included to support the need for in-house development without jeopardizing modifications made by the business partner.
VAR Value-added reseller - Business partners use this layer, which has no business restrictions, to add any development done for their customers.
BUS Business solution - Business partners develop and distribute vertical and horizontal solutions to other partners and customers.
SL1-SL3 Certified solutions - Partners certified under the Microsoft Dynamics Industry Solution (MDIS) program distribute their solutions in the SL layers.
HFX Hotfix - The Dynamics AX team delivers critical hotfixes using the HFX layer.
GLS Global solution - The Dynamics AX Global Development and Localization team provides a set of GLS layers that contain country-specific functionality for regions in which Dynamics AX is released.
SYS System - This is the lowest model element layer and the location of the standard Dynamics AX application. Only Microsoft has access to the element definitions at this layer.
Objects defined at higher levels of the stack override objects defined at lower levels of the stack. Means a USY Layer Object will cast a shadow on the same object in say VAR Layer. Objects are stored in a separate file (*.aod) on each layer whenever they are saved from the MorphX development environment client. Element definitions are read from these files and dynamically composed by the Dynamics AX runtime. Object instances are created on either the server or the client based on the model element definition.