Layouts are different formats that apply to your home page and categories page where your products are displayed. You can select from a variation of layouts with different combinations of display. For example, on your home page products grid, you want to display 4 products in a row with a right side banners panel, or you want to display 3 products in a row with no side panel banners, you can choose the layout with these settings.
Please note that applying a layout does not change any design element of theme, just the overall layout and structure is updated, all other theme elements remain the same.
To select a new layout for website home page:
To select a new layout for category pages: