What is the 'overdrive' on that appears in the car?

It is a higher gear for long distance driving such as on the freeway. Most cars are a 4 speed automatic with overdrive or in other words, a 5 speed. Overdrive lets the car shift into overdrive (5th gear) and get better mileage on the highway. I would leave it on all the time because it wont make a difference around town. It just allows the car to go into the higher gear when it needs to.