Overlays is a way to extend Nixpkgs in a format which can easily be shared, imported and combined. An overlay can add or override packages, like any user could do before with packageOverrides.

An example of overlay is the rust overlay provided in the nixpkgs-mozilla[1] repository, which package all latest versions of the rust compiler[2].

[1] https://github.com/mozilla/nixpkgs-mozilla [2] https://github.com/mozilla/nixpkgs-mozilla/blob/master/rust-...