The Basic Text effect
places text on an existing layer—unlike text created on text layers
or imported text created in Adobe Photoshop or Adobe Illustrator,
either of which becomes its own layer. Use text layers for greater
control over text formatting and text animation. (See Text.)
This effect works with 8-bpc color.

Original (top left) and after applying Basic Text (bottom
left) and selecting Composite On Original (bottom right)
After Effects creates an alpha channel for text it creates. You
can use a text effect’s alpha channel with features such as track
matte.
Note: The width and height of text aren’t constrained by the dimensions
of the layer; the layer dimensions merely define the visible region
of the text. This feature makes it simple to scroll text over a
layer.
- Position
-
The position of the text on the layer.
Note: The behavior
of the Position point is affected by the Alignment setting in the Basic
Text dialog box. The point always positions the vertical center
of the text relative to the layer. However, if the text is left
aligned, the point positions the left edge; if the text is center
aligned, the point positions the center; and if the text is right
aligned, the point positions the right edge.