Well glazing is purely using your paints at such as consistency that they are in and of themselves almost translucent. You then go about applying glaze after glaze after glaze to build the colour up. Generally the technique is used to smooth the transitions between colours as using it for an entire model will mean you take AGES to paint it, however the smoothness of the paint job will be very very good. In my WIP thread, look at my Salamander Dreadnought, I'm glazing there to keep it as smooth as possible.
When glazing you want to have your paint diluted to about 75% to 35% or higher generally speaking. Thats water to paint %. Also you'll be painting with a damp brush not a wet one, that part is key so as to avoid tide marks and pooling. In essence if you paint a line on the model, by the tim your brush leaves the model the line is already dry, thats the type of dampness I'm talking about.
Layering on the other hand is where you have paint generally at a more concentrated state IE 50% to 50% or 60% to 40% water to paint ratio and instead of building up glaze after glaze to achieve a smooth colour or transition your aim is to allow part of the previous layer to show through. So, for example, if I paint a space marine shoulder pad, with a zenithal technique, I would want the bottom of the pad to be darker than the top. SO if I were to layer it, I would start with my darkest colour a and paint the entire shoulder pad. I would then take my first stage highlight b and paint the entire shoulder pad but this time leaving about 2 mm of the previous layer unpainted at the bottom of the pad. I would then repeat this with my next highlight c, this time starting on highlight b and leaving 2 mm of b showing and so on for all subsequent highlight stages.
If you've ever read a WD masterclass then they outline layering quite nicely and you'll be able to see what I mean with pictures. However the EM team will then go back to those 2 mm areas where the previous colour was left showing and glaze over them so as to smooth the transition.
In terms of how transparent you want your paints to be, that is personal preference and you'll need to experiment to see what works best for YOU, however I think I'd be safe in saying that the %'s I used above are about the average of most painters using these techniques. Personally I don't use mediums to thin my paint, only water. However I have used Vallejo's Glaze medium before and thats ok, but I tend to find that it makes drying time longer and when I glaze I want the described damp effect above not a longer drying time.