What levels of image product are there and what do they mean?

Imagery comes in different levels of processing, although most users will want ortho imagery

Level 1A is imagery that has been corrected for radiometric (image pixel value) distortions due to the instrument. It is quite basic imagery that has not been corrected for locational positioning in relation to the ground. It is designed for users who wish to do their own correction for image positioning and geometry.
Level 1B has radiometric correction identical to that of level 1A. However, it also includes
locational correction of Earth curvature and rotation and internal distortions of the image so that distances, angles and surface areas can be measured.
Level 2A. This product can be used for photo-interpretation and thematic studies. It has radiometric correction identical to that of level 1A but with locational / geometrical correction to a standard cartographic projection. This product can be used in geographic information system for combination with other datasets.
Level 3A, or ortho imagery. If the region you are trying to map is quite mountainous you will need to account for relief displacement in order to obtain consistently high position accuracies. A digital elevation model (DEM) must be used so that the relief displacement at differing elevations can be accounted for. This process is generically called ortho-rectification. The position accuracy of Level 3A images generally matches the spatial resolution of the original data, including areas of high local relief.
Additional details can be found here.