Notebook stylesheets are organized in a cascading structure, which means that certain style definitions for a stylesheet are unique while others are inherited from its base stylesheet (or "shared stylesheet.")
Format ► Edit Stylesheet will embed a private stylesheet, which inherits from the current stylesheet in your notebook, and open the stylesheet's style definitions window.
To modify a style in the stylesheet, search for the style using the dropdown menu or enter the style into the input field in the style definitions window. You may also create new styles by entering them into the input field. Any changes you make will only be reflected in the notebook's private stylesheet.
You can examine the notebook's base stylesheet by clicking on the base stylesheet link.
The style definitions window also includes the Install button that can be used to add the stylesheet to the global list of stylesheets available from the Stylesheet menu.