1st layer of clothing = base layer, functional underwear
Underwear made of functional material or merino wool keeps you dry and warm. It wicks sweat away from the skin and is pleasantly warm.
2nd layer of clothing = mid-layer, short & long sleeve jerseys
A mid-layer garment is worn directly over the underwear and protects the body from the sun and cold, on warmer days you can get by with two layers.
3rd layer of clothing = shell layer, jackets, winter & rain pants, vests ...
The so-called outer shell is used to protect against the elements, both wind and rain stay outside, heat only escapes when you want it and ventilation allows.