Layer (Transport): Routes based on IP and TCP/UDP port. Doesn't look at the request content. Fast and efficient.
Layer (Application): Routes based on HTTP headers, URL path, cookies. Can route /api to API servers and /static to CDN.
Use Layer when you just need to spread traffic. Use Layer when you need smart routing.
Layer is slower (more processing) but more flexible. Most production systems use Layer load balancers like NGINX, HAProxy, or cloud solutions like AWS ALB.