Hi Arun,

Hierarchy Type : It is one of the Parameters passed to the HierarchyPrincipal .
The hierarchy type of this hierarchy member. hierarchyType value is set in the approval policy.
This value usually is one of retrieved value from the IHierarchyProvider as LOV (List of Values) calling fetchHierarchyTypes() method.

In Rules Designer, you can build a HierarchyPrincipal as the starting point and top approver. To build a Hierarchy Principal, use the HierarchyBuilder function, as shown in screenshot below HierarchyBuilder Function.

Attaching the screenshot for your reference.