Level 1 routers will only share routing information with other Level 1 routers. This makes them stub routers. In the topology above, area 40 is a stub area. Routing within an area is Level 1 Routing.
Level 2 routers will only share routing information with other level 2 routers. These routers track routing information between areas. This is Level 2 Routing.
Level 1-2 routers are special, as they take part in both level 1 and level 2 routing. They connect areas together, which makes them the perfect place to use summarization. These routers maintain a separate database for level 1 and level 2 routes.
Areas can connect to each other, or a dedicated backbone area could be used for transport. Backbones consist of routers that do level 2 routing, including level 1-2 routers. They won’t have hosts or Level 1 routers connected.
A small network does not need to have a backbone at all. It can start as a single area with only level 1 routers. As an alternative, it can be all level 1-2 routers, to make it easier to add a backbone later.
A domain is an entire IS-IS system under common administration. This is like the concept of an Autonomous System in BGP.