The timeline shows you your complete video. Additionally, the orange circle shows the audio track that you're focusing on when playing back the video. If your video has multiple audio tracks, this comes in handy. The S1 and S2 tracks are for subtitles. You can easily create a subtitle track for you video.
It is here where you can add chapter breaks. On my wish list I would ask for the ability to set chapter breaks automatically. One DVD maker I've used allows you to set the interval and it automatically sets the chapter breaks.