Plain English Meaning

It means you are flying an old procedure that was designed around a ground station, but you are allowed to use your GPS to fly it. The path is the same -- the equipment guiding you along it is different.

Full Definition

An authorization that allows a pilot to fly an existing ground-based instrument procedure -- such as a VOR, NDB, or holding pattern -- using GPS for navigation guidance instead of, or in addition to, the original ground-based navaid. The underlying procedure remains the same; only the navigation source used to fly it changes.

Context Anchor

Seen in instrument flying when GPS is used to fly a published hold or other procedure that was not originally written as a GPS-only procedure.

Derivation

Overlay' here keeps its everyday sense -- one thing laid on top of another. The GPS guidance is laid the existing ground-based procedure, so the procedure underneath is unchanged but a new way of flying it sits on top.