Stacking Context

In this example every positioned element creates its own stacking context, because of their positioning and z-index values. The hierarchy of stacking contexts is organized as follows:

Root
- DIV #1
- DIV #2
- DIV #3
- DIV #4
- DIV #5
- DIV #6

It is important to note that DIV #4, DIV #5 and DIV #6 are children of DIV #3, so stacking of those elements is completely resolved within DIV#3. Once stacking and rendering within DIV #3 is completed, the whole DIV #3 element is passed for stacking in the root element with respect to its sibling’s DIV.

HTML:

<div id="div1">
  <h1>Division Element #1</h1>
  <code>position: relative;<br/>
  z-index: 5;</code>
</div>
<div id="div2">
  <h1>Division Element #2</h1>
  <code>position: relative;<br/>
  z-index: 2;</code>
</div>
<div id="div3">
  <div id="div4">
    <h1>Division Element #4</h1>
    <code>position: relative;<br/>
    z-index: 6;</code>
  </div>
  <h1>Division Element #3</h1>
  <code>position: absolute;<br/>
  z-index: 4;</code>
  <div id="div5">
    <h1>Division Element #5</h1>
    <code>position: relative;<br/>
    z-index: 1;</code>
  </div>
  <div id="div6">
    <h1>Division Element #6</h1>
    <code>position: absolute;<br/>
    z-index: 3;</code>
  </div>
</div>

CSS:

* {
    margin: 0;
}
html {
    padding: 20px;
    font: 12px/20px Arial, sans-serif;
}
div {
    opacity: 0.7;
    position: relative;
}
h1 {
    font: inherit;
    font-weight: bold;
}
#div1,
#div2 {
    border: 1px dashed #696;
    padding: 10px;
    background-color: #cfc;
}
#div1 {
    z-index: 5;
    margin-bottom: 190px;
}
#div2 {
    z-index: 2;
}
#div3 {
    z-index: 4;
    opacity: 1;
    position: absolute;
    top: 40px;
    left: 180px;
    width: 330px;
    border: 1px dashed #900;
    background-color: #fdd;
    padding: 40px 20px 20px;
}
#div4,
#div5 {
    border: 1px dashed #996;
    background-color: #ffc;
}
#div4 {
    z-index: 6;
    margin-bottom: 15px;
    padding: 25px 10px 5px;
}
#div5 {
    z-index: 1;
    margin-top: 15px;
    padding: 5px 10px;
}
#div6 {
    z-index: 3;
    position: absolute;
    top: 20px;
    left: 180px;
    width: 150px;
    height: 125px;
    border: 1px dashed #009;
    padding-top: 125px;
    background-color: #ddf;
    text-align: center;
}

Result:

Source: https://developer.mozilla.org/en-US/docs/Web/CSS/CSS_Positioning/Understanding_z_index/The_stacking_context.