[How To] Merge Down and Reference Layer

Merge down will combine the layer you're on with the one below it, they will become a single layer. Grouping allows each layer to stay as separate layers but be in a group. So you can reduce the number of visible layers by grouping them then enter a group to see each layer.

Reference Layer is a bit different to using it as something to copy. For example if you have a black and white image, you can set that as the reference, then on a different layer you can choose the fill tool, select a colour then colour in the reference image on different layers.