The structure of Hierarchical Lookup Groups is that of a parent-child relationship. A parent Hierarchical Group is created that can have multiple Hierarchical Entries under the group. Subsequent Hierarchical Groups can be created that are children to the parent Hierarchical Group.
Within each child group, there are Hierarchical Entries. The Hierarchical Entries from the child groups are mapped to the entries from the parent group. This controls which values display in the field drop-down based on the parent group entry selection.
In the diagram above, Parent Hierarchical Group (1) is the top level hierarchy. It has the group entries of Entry (1A) and Entry (1B). (1) also has a Child Hierarchical Group (2).
(2) has three group entries: Entry (2A), Entry (2B), and Entry (2C). (2A) is a child of (1A). If a user chooses (1A) in a drop-down, the only value that will show in the group (2) drop-down list will be (2A).
(2B) and (2C) are children of (1B). If a user chooses (1B) in a drop-down list the values (2B) and (2C) will be present.
This is just one example of a hierarchy that can be built. A Parent Hierarchical Group can have multiple Child Hierarchical Groups and Parent Hierarchical Entries can have multiple Child Hierarchical Entries.