Overlay describes a situation in which the money on offer is worth more than the risk suggests. In betting, a price is an overlay when it pays more than the true chance of the outcome justifies: a bet that should be priced at 3/1 but is offered at 5/1 gives the bettor positive expected value. In poker tournaments, the word has a narrower meaning. When a room guarantees a prize pool and the buy-ins collected fall short, the operator pays the difference, and that shortfall is the overlay.
Operators treat overlay as a marketing cost to manage. Guaranteed tournaments attract players, but every unfilled seat comes out of the house’s pocket, so guarantees should be sized against realistic entry numbers, late registration and re-entry options. On the sportsbook side, trading teams watch prices closely so that a mistaken overlay is corrected before experienced bettors can exploit it.