Using Levels in Photoshop

While you can adjust levels in Photoshop and Photoshop Elements without creating an adjustment layer, adjustment layers provide a lot of flexibility in changing your adjustments later in the editing process. To create an adjustment layer, click on Layer - New Adjustment Layer - Levels.

This will bring up a screen that allows you to name the adjustment layers. I suggest naming it Level Adjustment so that if you create other adjustment layers (brightness/contrast, etc) at a later time you will be able to easily identify each layer.

Note that adjustment layers will affect all layers below it - but not those above it.