Layers are "levels" in your art that may contain different things like text, shapes, textures etc. Picture them as transparencies laid over the background. By keeping items on different layers you can move them around, resize them, change their color, and many other wonderful things without affecting the background or other layers.
planetphotoshop has many excellent lessons. Try starting at the back first and working your way forward. Many of the early (page 27) lessons are specifically for PS 7. I use PS Elements 6 but there are many similarities, especially in the fundamentals. Have any questions post here and we'll try and help.