What's a "sprite"? A small 2D picture used in games and apps — a character, an icon, a button, one frame of a walk cycle. Drawn pixel by pixel so it stays crisp at any size, the way old video games and modern app icons still look today.
Layers stack separate drawings for one picture (body, then hat, then eyes).
Frames are separate pictures shown one after another — that's how you animate.
Palette is your limited set of colors, kept small on purpose for that classic sprite look.