In ACIM's teaching, there was originally just one "level" or realm in which to exist - The Kingdom of God, Heaven. This is true because the Kingdom is one logical state or nature.
In the separation, we invented a second level or logical state, by trying to be opposite to the Kingdom. This wasn't a partial opposition it was a total opposition, like light and darkness. This second state is a state of dreaming and perception, opposing knowledge. It's technically inside of Heaven, but it a belief in being exiled or outside of it. So this forms a kind of second "level."
We often visualize the two main levels as "above and below", where Heaven is the higher level and Earth is the lower. The two levels contrast and oppose each other in EVERY way imaginable. Light vs Dark, Reality vs Illusions, Life vs Death, Love vs Fear, Immortality vs Mortality, etc. Some refer to the two main levels as level 1 (heaven) and level 2 (earth).
Within level 2 (earth) - "Earth, heaven's opposite in every way", which is the level of "all perception", there is a wide spectrum of states of mind ranging from false perception to true perception. But it's often helpful to contrast them more extremely which suggests two additional levels within the level of perception - the lower dream and the higher dream.
In the lower dream there is false perception, physical objects, form, bodies, the world/earth, attack, sin, death, sickness etc. In the higher dream there is true perception, no physical objects, no bodies, the real world, no sin or sickness, no death etc. They are effectively opposite states WITHIN level 2.
It's important to realize that this basic logical structure is infused throughout the course, because Jesus is at various times talking within the context of different levels. For example he might talk about the higher dream of true perception, and it can sound glowing and lovely, but if you forget that it is within the CONTEXT of level 2, you might be tempted to forget that ALL of the rules that apply to level 2 still apply.
For example the course tells us a glowing report about the real world, or the forgiven world, or true perception/salvation, but at the same time it also reminds us in other passages that "the real world still is but a dream" and "those who perceive (at all) still need healing." So within level 2, the dream of perception, even when we're talking about true perception or forgiveness or the healed body, we have to keep in mind that both the rules of true perception (higher dream within level 2) AND the rules of level 2 itself are simultaneously applying.
Confusing these levels, not being clear about which statements are referring to which levels, not understanding which contexts certain statements are given in and not keeping in mind that the larger context of levels 1 and 2 always apply when discussing anything to do with the realm of perception, can lead to a whole lot of confusion about what stuff means or implies. This is part of what's called "level confusion", not knowing which level is above or below or inside of another.
The general story, in summary, is that you began in level 1, you dreamed of level 2, and while dreaming of level 2 you dreamed of a level 2 inside of level 2 - a lower dream of hell and form, and then the holy spirit provided a higher dream - a level 1 inside level 2, which reflects the real level 1 of heaven, to lead you out of the dream into reality.