This is an example of an inserty edit. An insert edit places a clip top of the existing clip while holding Ctrl. To do this, you drag the clip onto the tmeline and the drag the clip over the other clip while holding Ctrl and place it there. I decided to place the 2nd clip where I did because It it had the best effect.
The difference between an overlay and an insert edit is that in an overlay the video does not split the video in two.
You would use an overlay when you want to show that time is continuous, while you’d use an insert edit when you want to show different scences that are happening at the same time without time being continuous. In this case the ovelay edit works better because having a more realistic time gives the video a better effect and looks much better.