Tier1 - links to your money site. Tier2 links to tier1 links Tier3 > Tier2 and so on. Tier 2 links make tier 1 links much more stronger. you can use automated softwares to build tier2 link. Senuke, Bookmarking Demon, Scrapebox and others. But keep in mind: Don't build links with those softwares directly to your website.
Tiers are basically chains. The 1 tier means direct link and the 2nd means link to 1st tier and so on.
just look at this picture, This is a link building or can be said network link. to more easily remember, use MS Excel. example: good luck!!
Yeh tiered link building can be very effective. Strong links to your money site, then use something like GSA, Scrapebox or even a public network for tier 2 & 3, to strengthen your tier 1's.