Territories break Locations down into different visibility groups. That means that users inside Officetrax aren't seeing data not meant for them to see/edit/use.
Parent Territories work similar to Manager Roles. A Parent Territory is a Territory above another and Employees in a Parent Territory are able to place Records in all Territories below them because they are considered to be a part of each Territory they manage.
Since Manager A is in North America, the Parent Territory, they are considered to be a part of each Child Territory below them (New York and California).
Everyone in New York (Manager A, Manager B, Associate A) is able to view the public and read only Records in New York. Manager A and B can view Associate A's Private Records in New York. Manager A cannot view Manager B's Private Records even though they are in a Parent Territory above Manager B - their Role prevents it.
Everyone in California (Manager A, Manager C, Associate B) is able to view the public and read only Records in California. Manager A and C can view Associate B's Private Records in California. Manager A cannot view Manager C's Private Records even though they are in a Parent Territory above Manager C - their Role prevents it.
Even though Manager B is above Associate B's Role, his Territory prevents him from viewing the Associate's Private Records - the same goes for Manager C and Associate A.