What does exactly nesting a clip in one layer do in relation to another clip in a different layer?
Without seeing the tutorial, it's difficult to say exactly, but I think what is happening is that the colour matte nest that you've created, is being used to control the blur on your other layer, probably by being set to being used as an &quot;alpha matte&quot;.  If your colour matte layer wasn't nested, I think Premiere wouldn't be able to see the alpha changes on that layer, due to the order in which processes are rendered in its pipeline.
Effectively, by nesting the matte clip, the compound blur &quot;sees&quot; the effect and the matte as a single piece of video to process. Without it, it would only &quot;see&quot; a solid colour block.
Un-nested version (mona is fully blurred)

Nested version - only blurred in the middle

Matte layer: