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Layering in ATG refers to overriding component properties by placing the component at the same config path.
The properties in the component picked up at the last in the config path, overrides the properties defined in the previous property files.
ATG supports left to right relationship for this.
like DAS DPS DSS DCS.
If a same property file is defined at the same config path in each of the above modules, then properties in DCS will super cede the properties in DAS DPS DSS.
You can also go through some example under the following link
suppose we have two modules, Module A & Modules B. So Nucleus first reads configuration(Module B) then reads configuration(Modules A). This is called config layering.