From Test-Scratch-Wiki

The costume pane ("backdrop pane" in the Stage) is part of Scratch's built-in paint editor. The pane consists of all the costumes of the currently selected sprite. It is scrollable and highlights blue the costume that is currently being displayed on the paint editor canvas.
Uses
Without the costume pane, there would be no possible way without hacking to access the different costumes of a particular sprite. It is a necessary feature to Scratch. It also displays the costume # value of each individual costume in a sprite. By showing the costume #, one can relate what costumes are needed when programming in accordance with the costume # block.
The pane also provides, at the very top, four buttons for creating a new costume. Without these options, creating a new costume would be a more difficult process involving duplication or the backpack.
Layout
The costumes are placed vertically in the costume pane. One can scroll down or up if there are too many costumes to all be displayed simultaneously. The layout consists of the thumbnails of each costume along with a few properties. Underneath the costume thumbnail is the costume name and resolution. In the top-left of the thumbnail is a small digit representing the costume's costume # value.
If a costume is selected, it will have a blue box around it. Then, the costume will be displayed on in the Paint Editor for editing. At the top-right of the blue box is a small "x"; when clicked, the current costume will be deleted. Any costume accidentally deleted can always be undone with Edit > Undo.
At the very top of the costume pane are the four options for creating a new costume. They do not scroll but have a fixed position to always be easily accessed wherever the vertical scrolling position is.