Heh...ok as usual, was clearly noted in the specs for this one that you don't have to follow it super-strictly. But I'll try and clarify it as much as I'm able to...
Background color - one color that the entire screen is set to every frame. In a LOT of games this is just black, but there are many where it is peach or cyan (but it can be any color from the hardware palette)
BG tiles - 8x8 pixels, and drawn in 2x2 tile (or 16x16 pixel) blocks in *most* mappers. Some games could draw a single tile at a time (reportedly castlevania III, tho i've yet to see a screenshot that actually does). Each block is drawn with 1 palette.
BG Palettes - same as sprite palettes, 3 colors and an alpha/dropout. Palettes could be animated/rotated though!
Parallax - covered in previous posts
Sprites - 8x8 and 8x16 only. Something like Mario in SMB is made up of at least 6 individual sprites at any time, but obviously that doesn't matter too much for the mockup.
Sprite Palettes - same as BG Palettes above
Vagaries of Sprite Display - only 8 sprites per raster line. A raster line is a single pixel horizontal line across the display (basically one row of electron gun screen attack) If you remember NES games flickering a lot, it's because they had at times more than 8 sprites per raster line, so they had to flicker some on and off. Sprites could be displayed either behind or in front of the BG tiles layer (see Super Mario Bros. 3 for wicked example of that)
Fade Regions - umm heh this shit is pretty weird. as far as i understand it you can specify a rectangular region of the screen (nto sure if its by pixel or by tile...i think its by pixel), and you can modify the color intensity. This was frequently used to do fadeouts during cinematics/start/end of levels (as was palette animation). Fade regions could display colors that are NOT in the normal hardware palette, because it would modify the color signal as it left the machine...totally weird. Basically, I do not recommend using it for mockup purposes
Was a special-case effect that was rarely used afaik.