Flat Tree, Layers

From left to right: Both options disabled, Flat Tree enabled, Layers and Vertical Tags enabled.

The Flat Tree option removes all hierarchies (Object manger display only, not internally!) and lists all the items. This mode is especially useful when you are selecting many objects, such as when you want to assign them to a layer.

The Layers option sorts the items into layer folders, where each folder is named after a layer in the scene and contains the items on it. Items not on a layer are placed in the Undef. Layer folder.