It can be found on each layer (third, below the eyes) ,it’s only available while union skinning and the documentation says nothing about it.
I also can’t tell any difference pushing the button makes…
See picture.
“Toggle background layers”. When activated the previous or next drawings of that layer will not show when onion skin is on. If you have two panels and don’t want to see a certain layer on the onion skin you can turn it off, or setting it as a background element, by toggling that button.
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Luis Canau