An overlay in The Sims 3 is used to add permanent, non-recolorable features to your creation, regardless of the patterns applied to the object. This makes it ideal for permanent decals, logos, dirt or scratches. In the example below, an overlay has been made to add a permanent gold flower decal to this table. Notice how the flower aligns with the center of the table-top on its multiplier.
The overlay works by using an alpha channel (see also: What is an alpha?). The only part of the overlay that will appear on your mesh will be the part where the alpha is white. Any areas of the overlay that have black on the alpha will be ignored. The alpha channel of the overlay is shown below.
Is it possible to add more than one overlay to my creation?
It is, but you should be using stencils instead for this purpose. See: What is a stencil?. Overlays should be used to apply a permanent detail to ALL pattern variations.