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A two stage furnace has 2 separate firing rates with the lower one operating at about 40% of the full rate. When your furnace kicks in it will start at the lower more efficient rate for 5 to 10 minutes. If your heat has not warmed up to where it was set during this time then the burner will switch to the higher firing rate to meet your heating needs. The 2 stage system is more efficient than a 1 stage furnace as the lower firing rate provides a better overall temperature by running the furnace more often at the lower rate. Thus, air is circulated more frequently which provides a more balanced room temperature throughout the home.
In many cases an upgrade from a basic 80% efficient furnace to a 2 stage is not a significant cost upgrade, usually around $300. These furnaces control the staging independent of the thermostat which works in most cases when people are not setting their set point back significantly. If you do set the temperature back to save energy it is better to upgrade to a furnace that the staging is controlled by the thermostat. These furnaces typically cost $600-800 more. In order to make it a true 2 stage, a 2 stage thermostat and additional wires need to be run. In cases when additional wires cannot be run there are thermostats available that although they are more expensive they can perform the furnace control over just 2 wires. There are also wireless thermostats that do the same they just are not wi fi capable.
The reason you need a 2 stage thermostat to control the staging is because when you set the thermostat back more than 3 degrees you want the furnace to fire in high stage to make up the 3 degrees quickly.
Most of the time your furnace is set to hold a given temperature for a long time for instance at night when you are sleeping. In this case, when the furnace gets a call for heat it only needs to make up a 1/2 to 1 degree and this is when the furnace will be in the low or first stage and give you longer run times for more even heating.