Imagine scrolling through Twitch and seeing hundreds of streamers with the same picture. That's how you can think of a Twitch overlay too.
These individual animations and graphics are laid over the original image like a template to enhance the viewing experience with appropriate designs and helpful information. Besides the main action, the score, time, names of teams and players, or other elements like the channel logo and banners are displayed there. Maybe you have seen a sports event on TV before.