I helped out for a couple of hours every week when my son was in Reception (he's now in Year 2) - private prep school.
Each time the teacher gave me differentiated targets for the activity, splitting the class into (normally) three ability groups.
For example, children in Group One have already demonstrated reliably counting to 100 in tens and are working on 200. Group Two are just getting grips with counting in tens so are working towards counting to 100 but will likely need help in getting the order of tens right. Group Three haven't grasped the concept yet so will be working on grouping cubes into into tens and counting them one by one if necessary.
The groups in theory could have changed every week according to previously demonstrated ability in the particular area, although in reality they were pretty stable, I rarely saw children demonstrate a high ability in one area and low ability in another. And I can honestly say that with one exception, as far as I can see, those who were high ability and low ability in Reception remain so today into Year 2.
It seems to be a cumulative effect. So, continuing the above example, those children placed in the 'top' group' for counting in tens in Reception, when the topic came up the next time, they would have already demonstrated that skill so perhaps would be moved on to counting in 5s or something. Of course because they were 'more able' they grasped that quickly also. So when the topic came round for the third time, perhaps in Year One by this time, they had already mastered both counting in 10s and 5s and so would again work on something related but more challenging, which they would again grasp very quickly...and so the cycle continues (FYI, in case it's relevant, my child was and still is 'very able' so was part of that top group)
So I guess the point is that whilst it doesn't "matter" as such which group a Reception child is in as long as they are happy, with my second child who is now in the Nursery class, I am doing everything I possibly can at home to ensure that she is up there in that top group from Day One. Because my personal experience is that once a child misses that boat, the cumulative effect means that in reality it's very hard to move upwards because the simply haven't been exposed to the same amount of material.
Just my two penny worth, I'm happy to be told that it's entirely different in other schools.