Can anyone expand on layer comps? Is this something that our designer can use to show different states? E.g. A list with items / a list without items (rather than 2 layer groups)
In a nutshell a layer comp is a saved state for your layers. It can include any/all of: visibility, position and layer style. A combination of these should let you create alternative views for practically any sets of states provided the original layers give you what you need.
For example, a navigation interface, complete with hover and selected states can be all done with the same text and icons (say) if you have a vector shape layer for icons, and then apply separate appearances for each interaction state.
The example you give can be done as simply as toggling the visibility of a layer you don't want to see, and moving other elements up to fill the void appropriately, then saving this as a separate comp.
That's a good description. Layer comps are one of the most underutilized PS features IMO.
I've used them myself to design alternative navigation styles for a site. For example, since the bulk of the site is the same, I managed a sample horizontal navigation in one layer group and a vertical navigation in a separate layer group. Layer comps allow you to progress on these simultaneously.
I've also used them as "snapshot" states before if I'm trying something experimental. It's a faster way to rollback than a chain of undos, etc.
