A word on saturation: saturation refers roughly to how intense the colors in an image are. When you draw into a layer that has the Saturation layer mode, the intensities of the colors in the layers below it are affected. For example, if you draw into the layer in black, white, or any shade of gray (in essence, no color), the layers below it will have no color as well. If you drew in bright red, the colors below it will be very bright (though not necessarily red).

A picture is worth a thousand words. Change the layer mode for the "Saturation" layer to (surprise!) Saturation. Scribble into it and watch what happens.

Here's a look at what's in the Saturation layer. It's just a blob of black pixels, but it has the effect we want. It makes a portion of our image appear to be grayscale.

Hit Control-Z to undo any scribbles you may have made.