There are valid and invalid storage overlays. An example of a valid overlay is where a field REDEFINES an area of storage aready defined. Since both field-names reference the same location, one is said to overlay the other.
An invalid overlay would be where, say, a 100-byte field is defined as located at the same address as an 80-byte field. The additional 20bytes will overlay some unspecified storage - assigning 100 bytes to the 100-byte field will cause whatever's in those additional 20bytes to be be overwritten. This may or may not cause an abend and can cause data corruption.