Good breakdown of Layer 1 vs Layer 2 (courtesy of KuCoin) in case you are confused like me:

"You go to Starbucks and order a cup of coffee. You pay with your Visa card. In that same hour or day, thousands of people may get a Starbucks cup of coffee anywhere in the world. Settling each of these numerous microtransactions would clog the network within minutes. Therefore, Visa groups them into blocks or batches and settles them through the banking system in regular intervals, such as once a week or even once a month.

The banks then settle who owes what to whom through the so-called settlement layer, an interbanking system of obligations. Can you recall so-called Clearinghouses? That’s what they do. An example would be the United States of America’s Fedwire.

A similar analogy applies here. The Lightning network is a protocol that would serve as the transaction layer. Millions of smaller transactions would be bundled together and then settled at once on the settlement layer – the Bitcoin network. Therefore, the Lightning network (LAYER 2) is Visa and the base (Bitcoin) layer is Fedwire (LAYER 1)."