The process of fossil formation begins as living things die and are covered so that there is no oxygen to decay which makes a fossil.  With time, nature will  evidently replace minerals into the bones or hard parts of the critters body which preserves it with in the rock.. More recent fossil remains can be found closer to the surface, while older fossils representing animals that died long ago would be found deeper in the earth. For example, more recently evolved animals, like birds, mammals, and modern day lizards, are likely to be closer to the earth's surface than dinosaurs or trilobite fossils. Therefore scientists may get a general idea as to the age of a fossil by the depth of the fossil in the rock layers of Earth. Also, they can tell the age of the rock by the fossil they find within that rock layer.  Because Earth's species have been constantly changing, more recently deposited rock layers would contain fossils resembling the species of today, where are deeper down we find fossils of critters that use to roam the land, but are not extinct.

The following pictures represent an example of this concept:.

This picture represent the surface of the earth now.  The lizard is an example of living critter that lives on the surface, of which some may become fossilized in time

This picture respresents the rock layer where many ancient fossils have been found 400 million years ago.  This layer use to be the surface layer and the fossil found here use to live on the surface of the land just like the lizard. 

This is a picture of a trilobite.  These critters lived 400 million years ago in a very shallow sea.  Scientist are able to determine the age of layers of rocks plus the environment in which they lived by studying fossils and rock layers.  Because trilobites loved so long ago, they are often found in layers of rocks that are much older!