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Docker utilizes image layers to manage application dependencies, which is central to its functionality. When creating an application, developers define a "Dockerfile," which outlines the necessary steps to build a Docker image. This process involves specifying the base image and the additional components needed for the application.

Each command in the Dockerfile results in a new layer in the image. These layers are essentially snapshots of the filesystem after each command is executed. This layered approach allows Docker to efficiently store and share these images since common layers can be reused across different images, thereby minimizing redundancy and optimizing storage.

Moreover, the dependency management becomes effective because each layer can represent various dependencies such as libraries, binaries, configuration files, and other related files required for the application to run. When an application is launched from an image, all its dependencies are included in the layered structure, ensuring that the environment is consistent and portable regardless of where the container is deployed.

This method contrasts with other approaches, such as running scripts to manage dependencies or using virtual machines, which can carry significant overhead. Layers within images provide a lightweight and efficient means of encapsulating the entire application environment and its dependencies.