Default Settings vs. Element's Selection Settings

I was asked a question last week about why a certain Layer kept popping up as the current Default Layer for a couple of Users.  I figured it would be helpful to provide a thorough explanation and leave it here for future reference.  The difference between - and even THAT there is a distinction between - Default Settings and Selection Settings can be confusing.  I hope this explanation helps.

When we refer to an Element's Settings or look at the Settings dialog box, there is an essential distinction that needs to be understood: Default Settings and Selection Settings.

Default Settings refers to the Settings of a particular Tool, prior to the placement of an Element - the Tool's Settings that are current once the Tool is activated.

Here: the Wall's Default Settings set to a Generic Exterior Wall Composite (note that the Wall behind is not selected):

An Element's Selection Settings are the Settings of an Element currently selected in the current View - for example, the Settings of a Wall highlighted in a Plan View.

Here: the Settings of a selected Wall (note the green-highlighted Wall selected in the background):