Will create a new layer. You can set the new layers attributes in the Layer Name field please see Edit Layer Attributes for an explanation of layer attributes. Just as in New Image can you also set the "Fill Type" to either the Foreground or Background color of the ToolBox, White or totally Transparent.
The size of the layer can be set in a number of different ways and units. Default is to measure the new layer in pixels which is the best if you are dealing with web graphics, but if you going to print your image then real world units such as inches is probably the preferred.