Selecting Elements for Deformation
Deformation groups are added to your scene's hierarchy in different places, depending on whether a drawing or peg element is selected.
A deformer affects all the layers under its hierarchy. When you create a new deformer using the rigging tool, it is automatically created as a parent of the selected layer, and will affect the selected layer and all its children. Hence, it's important to select the right layer before attempting to create a deformer.
For example, if you wish to create a deformer for an arm, and the arm is broken into several layers, you could rig the arm in a hierarchy where the upper arm is the root, the forearm is the upper arm's child and the hand is the forearm's child. Then, if you create your deformer on the forearm, it will be created as a parent of the forearm, and will hence affect the whole arm, as its other parts are children of the forearm.
You can also group several layers under a peg, and create your deformer with this peg selected. When you create a deformer on a peg, the deformer is created as a child of the peg, but as a parent of all of this peg's children. This is because a peg is likely to be more useful over a deformer than under. If you move layers that are under a deformer, they will exit the intended deformation zone, and may appear severely warped and distorted. Hence, it's better to create deformations under pegs as much as possible, and pegs under deformers should only be animated if the deformer is left untouched. Since the deformer will be created as a parent of all the peg's children, it will affect all the layers under the peg.