What are layer 2 protocols?
This layer 2 wording is an analogy/comparison to the network TCP/IP stack. Basically the TCP/IP stack allowed for networking machines as the foundational layer (or the layer 1 infrastructure). And on top of this infrastructure came the protocols, which are commonly used today (http, mail, ...). When comparing to the bitcoin world, the idea is that bitcoin as per today is the "payment infrastructure", and on top of it there will be protocols for lightning (micro transactions), schnorr sigs, smart contracts, ... So the underlying bitcoin network has proven to be reliable, and serves as a utility for future setups on top.

There is also a certain euphoria when people talk like this, hoping the future will reduce/avoid today's limitations with these "layer 2" protocols. Exciting times ahead!