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You can think of the image canvas as the equivalent of the paper on which a photo is printed. While you’re working with a digital photo, image data may temporarily lie outside the canvas space, but it will be clipped to the canvas boundary as soon as the image is flattened. To extend our limited analogy just a little further, think of the layer data as the image projected by a photographic enlarger in the darkroom. Although the projected image may be offset or enlarged so that it falls outside the borders of the paper, the data still exists; you can continue to work with it right up until the moment that the photographic paper is exposed.