The Overlay blending mode preserves the highlights and shadows of the base color while mixing the base color and the blend color. It is a combination of the Multiply and Screen blending modes--multiplying the dark areas, and screening the light areas. A blend color of 50% gray has no effect on the base image.
Because of the way 50% gray becomes invisible on a overlay blended layer, it can be useful for a number of techniques and special effects.
To create a soft, dreamy effect:;
- Duplicate the base layer.
- Set the top layer to Overlay blend mode.
- Apply Gaussian Blur filter to the Overlay layer and adjust to the desired effect.
- Duplicate the base layer.
- Set the top layer to Overlay blend mode.
- Go to Filters > Other > High Pass and adjust the radius for the desired amount of sharpening.
- Add some text or a solid shape in a new layer above your image, using black as the fill color.
- Go to Filter > Stylize > Emboss and adjust as desired.
- Apply Gaussian Blur filter and adjust to 1 or 2 pixels radius.
- Set the blend mode to Overlay.
- Move layer into position using the move tool.
- Create a 50% gray solid color fill later above your image.
- Do Filter > Render > Lens Flare on this layer. Adjust lens flare effect as desired.
- Set the blend mode to Overlay.
- Move layer into position using the move tool.


