A layer 2 is a separate network that processes transactions off the main blockchain, the layer 1, and posts the results back to it. Arbitrum, Base, Optimism and zkSync are layer 2s for Ethereum; the Lightning Network serves Bitcoin.
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Ethereum handles a limited number of transactions per second, so fees spike when it is busy. Layer 2s bundle thousands of transactions and settle them on Ethereum in one go, cutting fees to cents while inheriting much of Ethereum's security.
Many layer 2s still rely on a single sequencer run by their team, and moving funds between networks needs bridges. Withdrawals from some rollups to Ethereum take days.
The network usually uses ETH for gas, though many have their own governance token such as ARB or OP.
A base blockchain with its own consensus, such as Bitcoin, Ethereum or Solana.