Level 1 clears all of the apps that are running, while level 2 clears your hidden programs that are running in your background. This is used to free up ram do the phone can run smoother.
True up to a point. The phone does a good job of automatically closing programs that have idle for a while, but if you are planning to run a hardware intensive game like dungeon defenders, or falling fred, you want at least 120 megs of ram free. What the op is asking about is samsungs built in task manager that you get to by holding the home button, not the advance task killer you download in the market.