Different parts of a document have different purposes; we call these parts environments. Most of a document is made up of regular text. Section (chapter, subsection, etc.) titles let the reader know that a new topic or subtopic will be discussed. Certain types of documents have special environments. A journal article will have an abstract, and a title. A letter will have neither of these, but will probably have an environment that gives the writer's address.
Environments are a major part of the ``What You See Is What You Mean'' philosophy of LYX. A given environment may require a certain font style, font size, indenting, line spacing, and more. This problem is aggravated, because the exact formatting for a given environment may change: one journal may use boldface, 18 point, centered type for section titles while another uses italicized, 15 point, left justified type; different languages may have different standards for indenting; and bibliography formats can vary widely. LYX lets you avoid learning all the different formatting styles.
The Environment box is located on the left end of the toolbar (just under the File menu). It indicates which environment you're currently writing in. While you were writing your first document, it said ``Standard,'' which is the default environment for text. Now you will put a number of environments in your new document so that you can see how they work. You'll do so with the Environment menu, which you open by clicking on the ``down arrow'' icon just to the right of the Environment box.