Here's how it was explained to me, for the region I live in:
FS 1-6 levels at competitions are there for kids who are recreational skaters who are probably skating once or twice a week. Judges are mostly focusing just on the required elements and less on all the rest.
Either Limited Beginner, then No Test or Beginner, High Beginner, then No Test events (depending upon competition) are before taking the MIF and freestyle Pre-Pre tests for kids heading for a more competitive route. Kids competing in these levels are generally taking multiple privates a week and are pretty serious about skating. Judges expect to see connecting steps, musicality, good posture, glide, flow, overall good presentation, etc.
Now it gets more confusing, you choose test track or well-balanced after taking your first tests.
Test track is aligned with the elements passed in the tests.
Well-balanced is more advanced then the elements needed to pass.
There is a big difference in the quality of skating, even though both events require the same set of tests. Take spins, for example:
Test track: two spins of a different nature, one position only, no change foot, no flying entry
Well-balanced: two spins of a different nature, may change feet and/or position, may start with a fly
You'll see kids in the test track who have just learned a sit and camel spin compared to a kid who may start with a flying entry into a sit with multiple variations, change foot to back sit.
Qualifying events at regionals are well-balanced, not test track. You can skate test track as a non-qualifying event but you won't go on after regionals even if you win your final round. You can switch between test track and well-balanced throughout your skating career, but you can't enter a test track event and a well-balanced event at the same competition.
I don't think they could make it more confusing if they tried! It is helpful to watch a competition to see the difference. My dd has skated test track and has a friend in well-balanced at the same level, her friend is skating at a much higher level.