A layer-1 is a blockchain network responsible for handling all functions of a chain including settlement, execution, data availability, and consensus. This has been colloquially named a layer-1 because rollups, or layer-2s, sit on top of these chains.
Check out this resource to learn more about layer-1s.
The Fuel technology includes all the components to run as a complete layer-1 solution. These components include consensus, data availability, settlement, and transaction execution. The common configurations for running in this mode would be proof of authority and a proof of stake via a Tendermint-BFT style.
While Fuel can run in this configuration, we do not promote or support this outside of testing, as the broader mission of Fuel is to enhance existing blockchains such as Ethereum as a high-performance execution layer.