The Five Most Useful Blending Modes in Photoshop | David Byrd
So that middle ground we talked about? That comes into play now with the Overlay section. If we switch the circle layer to Soft Light, Photoshop will ignore the gray circle or 50% gray. However, it does something special beyond that. It now uses the various stages of color and luminosity to either darken or lighten the image, based on their percentage from 50% gray. Think of this process like a dimmer switch for color and light. The switch starts at the mid-tone level of 50% and as you slowly move it toward the darkest point, the layers beneath gradually get darker and darker. The same is true in reverse: light and colors get gradually brighter as you move up the sliding scale toward 100% white.
Keep in mind that Photoshop is using the available data of the layer that you are moving through in these modes. We just used a layer of these primary luminosity-colored circles, but generally your layers are going to be a little more dynamic and more interesting than that.
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