Level 1 has no influence on level 2 or 3. In other games this is called the 'hard coded' level and is normally not accessible to moders. Level 2 allows you to add self made contend (new npcs, new hairstyles, new look etc.) just like a DLC. You can't add totally new stuff or change the game mechanics.
Let's call it scripting and shuffling of existing things.
Level 1 is modifying the gamedatabundles, stringtables etc. PoE2 has three levels at which one can mod the game.
paint, gimp, photoshop, paint3d, blender This is a 2nd level Tutorial on how to edit assets and assetbundles.
