The paste function puts whatever is in memory from the last Copy or Cut command into the current image. The pasted section will remain as a "floating selection" which appears as a seperate layer in the Layers dialog (Image Menu -> Dialogs -> Layers, Channels and Paths). This selection can be moved, altered, etc, in the same way as a normal layer. Once you have decided how you want the pasted selection to look, you can click elsewhere on the image to merge the pasted section into the current layer, or right click the entry in the layers dialog, and click "Anchor Layer". You can only have one floating selection at any one time.

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