Creating art for screen printing

Color separations is automatically. Although you can do it manually, it's always better let the program separate colors. You should choose if you use spot colors (such as Pantone colors) or Process Colors (such as CMYK)

Layers aren't really related to separations. You can do a 12 color separation on a single layer. It's the spot colors, or Pantone colors that will make the output device produce a single output for each color. If they're on a single layer, or 12 layers doesn't matter.

If you're working with CMYK, then there's no separation that needs to be performed on that. It can print each color without assigning them to spots or Pantones.

Layers are useful for organizing your separations though. I always do my separations on a single layer, but I use a separate layer for special screens like an underbase. That allows me to easily isolate the art from special screens when I'm working on it.