Core terms
Level 2
A display of orders at several price levels on each side of the market, usually by venue or market participant. It shows only the books your data feed covers.
Level 1 shows the best bid and ask. Level 2 lists the prices behind them: who is bidding and offering at each level and how many shares. Traders use it to judge how much size sits near the price and how quickly levels are being added or pulled.
Level 2 is incomplete by design. Hidden and iceberg orders, odd lots on some feeds, and off-exchange liquidity do not appear. Orders can also be placed and cancelled to create an impression, which is what spoofing rules prohibit.
What traders should verify
Watch how the book changes, not one snapshot. Size that keeps vanishing as price approaches it is a different signal from size that trades.
Do not conflate
Trader usage; Level 2 products differ by data feed and vendor. A large displayed order is not a commitment to trade.
Primary source
Trader usage: there is no official definition, and platforms and tools may calculate it differently.