These are three methods of recording and naming files on disk under the ISO 9660 standard. There are three nested, downward-compatible Levels.
In Level 1 (the most restrictive):

Each file must be written on disk as a single, continuous stream of bytes -- files may not be fragmented or interleaved. A filename may not contain more than eight d-characters. A Filename Extension may not contain more than three d-characters. A directory name may not contain more than eight d-characters.
In Level 2, again, each file must be written on disk as a single, continuous stream of bytes.
In Level 3 there are no restrictions.