As a GIS instructor, I always tell my students that its much easier to SEE what the overlay tools do rather than try and describe them. They are very powerful tools that combine two or more feature classes into a new feature class. The new feature class picks up all of the attributes of the input feature classes.Specific GeoProcessing Tools
There is no single tool called “overlay.” Rather, the overlay toolset which is in the Analysis toolbox in ArcToolbox, contains various overlay tools. In the video, below, I will show you three of them: Intersect, Union, and Erase.