This continues all the way down the line with multiple video tracks. The text clip has been generated with transparent areas. If there were no text, all of the V1 clip would be visible. The transparent areas of the text clip show up as checkerboard in the Viewer. This holds true for ALL clips.
Video too can have transparent areas.
You aren't limited to two layers. Other text clips could be layered onto higher V tracks. His biggest fears for the future are that one day Apple will perfect FCP and there will be no problems left to solve, the accumulated weight of manuals will overstress the structure of his house and that render times will shrink to negative numbers, thus increasing the working day.