Level 2 data is a full display of all the limit orders on both sides of the market ie. price, size and who it is, and it is used for day trading purposes. You'll normally have to pay a fee for the data
As a very simple example, you might wait until you see many large buy orders appear at the bid, and maybe the bid price was starting to move up too. You would assume that at this moment, demand was heavily outweighing supply, and that prices would rise, imminently. Obviously it gets a whole lot more complex than this.
The advantages are that you are getting more information about the orders out there in the market, although more is not always necessarily better unless you know what to do with it.
IMO, it's best left well alone until you have been trading for a while.