The Populate Layer
This page describes what the Populate layer does and how to use it correctly.
Don't plaster the map with it!
First of all, do not plaster the entire map with it! If that's what you want to do, use the "allow Minecraft to populate the entire terrain" option on the Export screen.
What it does
Biomes (in Minecraft) are different combinations of temperature, precipitation, vegetation type, etc.. They are stored per horizontal (x, z) coordinate (in other words, per column of blocks) and they influence the colour of grass and leaves, whether it rains, snows or is dry, whether water freezes and which mobs will spawn.
When Minecraft generates land, it does so in two steps:
In step one, it calculates the biomes according to its own world generating algorithm and then generates the actual land mass, surface terrain (grass, sand, etc.), river or ocean water and caves, according to the biome. Since WorldPainter pre-generates the chunks, Minecraft never performs this step for those chunks.
In step two, the "populate" step, Minecraft adds underground resources (ores, lava and water lakes), creates the vegetation (trees, tall grass, mushrooms, flowers, lily pads, etc.), small lava and water lakes on the surface and structures (abandoned mines, NPC villages, strongholds, dungeons and desert and jungle temples). It does this according to the biome settings stored in the chunk. This second step can be performed by Minecraft on chunks generated by WorldPainter, because there is a flag for each chunk in the map data telling Minecraft whether that chunk has been populated yet.
This second step is what the Populate layer controls. If you paint the Populate layer on a chunk, or check "allow Minecraft to populate the entire terrain", WorldPainter will turn off the flag saying the chunk is already populated for that chunk (or all chunks), which will cause Minecraft to populate it the first time it loads the chunk. If you don't use Populate, the chunk will be left as it is (which may include trees, etc. generated by WorldPainter using the other layers) when it is loaded by Minecraft.
Exactly what Minecraft will do depends on the biomes you painted (or WorldPainter chose automatically) for that chunk. Note that all WorldPainter can do is tell Minecraft to populate the chunk, or not populate the chunk. It has no control over what Minecraft will do exactly. For instance, there is no way to tell it not to generated surface lakes of water or lava, at least not for the Default and Large Biomes world types. You do have one option though, and that is to use Superflat. See below for details.
Note that whether or not you use Populate, the biomes will still determine the colour of grass and leaves, whether it will rain or snow or be dry, whether water will freeze and what kinds of mobs will spawn.
Controlling the population
Even though Minecraft does the population, not WorldPainter, there is one way in which you can control what Minecraft will do: set the world type to Superflat, and use the Superflat preset to configure the population step. For more details about this technique, see this YouTube video by Fornan II.
Mixing Populate with other layers
If you mix Populate with the other layers and features of WorldPainter (some of which are enabled by default) you might get unexpected or unintended results. It's important to know what it does and what the consequences are.
For instance, WorldPainter by default already generates underground ores, water and lava (as controlled by the Resources layer, which is turned on everywhere by default on the Dimension Properties or Export screen). If you leave that turned on, and then also use Populate, you will get double the resources. This may or may not be what you want, but you should be aware of it.
Another example is forests. If you use one of WorldPainter's tree layers (Deciduous, Pine, Swamp or Jungle), WorldPainter will generate trees in those areas (with a size and density determined by the intensity with which you painted the layer). By default (if "automatic biomes" is enabled), it will also set the biome in those areas to "forest" (or "taiga" if you also use the Frost layer in the same area). That means that if you use Populate in the same location, or enable "allow Minecraft to populate the entire terrain", Minecraft will also generate trees there and you will get double the amount of trees! Again this may or may not be what you want, but you should be aware of it.