An overlay is anything placed on the picture after it was taken: a discount label, a brand logo in the corner, a shipping banner, a frame, a call to action. Where overlays are excluded, a row of search results shows products alone, and the listings in it can be compared on equal terms.
Text that belongs to the product is a different matter: a slogan printed on a T-shirt, the lettering on a label or an engraved logo is part of the item and stays in the picture. Rules differ between the main image and the additional ones, and from one marketplace to the next, so the rule to follow is the current one of each channel.