Overlays are a collection of editor objects, that can be merged into the editor.
Depending on the type of overlay, they can consist of units, objects, vehicles and markers.
For more information, see Layers and Overlays in the VBS Editor Manual.
Overlay commands are used in the backend programming of the editor, and are not really of practical use in mission programming, as any loading of an overlay will invoke a selection dialog (similar to the mission selection dialog), which cannot be circumvented or automated via a script (i.e. it is NOT possible to, for example, automatically load and merge a layer during a mission).