allows files and directories of separate file systems to be transparently overlaid and forming a single coherent file system
Probably create the new tag overlay-filesystem and remove unionfs and overlayfs from existing questions?
Wikipedia
UnionFS is a filesystem service for Linux, FreeBSD and NetBSD which implements a union mount for other file systems. It allows files and directories of separate file systems, known as branches, to be transparently overlaid, forming a single coherent file system. Contents of directories which have the same path within the merged branches will be seen together in a single merged directory, within the new, virtual filesystem.
Another explanation from the kernel documentation would be:
Overlay Filesystem
This document describes a prototype for a new approach to providing overlay-filesystem functionality in Linux (sometimes referred to as union-filesystems). An overlay-filesystem tries to present a filesystem which is the result over overlaying one filesystem on top of the other.
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