Kitty overlays are new window sessions that can be brought up over existing sessions. When the overlay is closed, the window session it overlayed is returned to where you can continue your work in its context.

In the linked gif I have three windows open in the tall layout. I then open my htop overlay in each in turn; after which I toggle to the stack layout and open my btop overlay. I end by closing the overlay and toggling off stack and back to tall layout.

You'll see near the top of my config that I have several overlays besides these two. It's actually a feature that could keep me on kitty for a while as I've grown so used to it my terminal experience would feel incomplete without them now.