Think of layers as seperate images on top of one another. By transparency or other methods they can interact with the layers below them. When you merge the layers the image becomes one layer so it has only one image attached to it. One way to emulate layers is by making a bunch of images seperately then compbining them one by one. When you merge visible all that you see at that time merges into one layer. If you flatten they do this too, but the transpaerency on the bottom layer is lost and sometimes effects between layers don't convert right. So normally to flatten an image you would want to merge visible. Most skinning programs do not accept the formats of images that support layers. The main formats for skinning are png, bmp, and tga. All three of these are technically one layer, but actually png and tga are two, the color and the alpha layer. The alpha layer is used for the transparency, bmp aren't transparent unless the application you are using them for accepts "magic pink" as transparent. So in order to use images for skinning purposes one must flatten the image. However for sharing your work for others to work off of and help the layers are very useful. So I would suggest saving the file as a seperate layered image and then saving it again as a nonlayered image such as bmp, png, or tga. I hope this helps
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