Layer comps, first introduced in Photoshop CS, are a great way to try out different compositions of your layers (hence the name). You can think of layer comps as snapshots of the state of your layers. For example, you can create a layer comp that records the current arrangement of your layers, rearrange a few layers to form a new composition, and then save that snapshot as a new layer comp. You can then flip between the two comps and decide which one you like best.
Photoshop lets you create as many layer comps as you want in a document. Layer comps merely record information such as layer positions and settings, so they don't add much to your documents file size.
Such convenience comes at a price, however. As layer comps don't record everything about your layers, they can be quite restrictive. For example, they don't track the following:
The stacking order of your layers within the Layers palette.
Any edits to the actual contents of a layer, such as painting on a layer, using a retouching tool on a layer, editing the type in a type layer, or transforming the contents of a layer with a transform command. However, they do record the horizontal and vertical position of a layer's contents.
Any Smart Filters that you apply to Smart Objects.
These limitations can sometimes be frustrating; however, once you're aware of what layer comps can and cannot do, they can be a very useful tool, both for artistic experimentation and also for those all-important client demos. ...