The Annotation tools are used to create text, dimension and arrow (leader line) primitives. These are similar to the tools available under Draw but are different in important ways. The annotation primitives are typically not considered part of the model but rather "decorations" for the model. Sizes are specified for draw objects in model space (real world sizes) while paper space is used for the annotation primitives. For example, .25" high text or a 3mm wide arrow will always be drawn with the size specified regardless of the drawing scale. This is also true when an annotation primitive or a group containing annotation primitives is scaled.
While all of the draw primitives are drawn on the active layer, there are separate layer selections for text, and for dimensions and arrows, since these objects are usually treated differently than the draw primitives.