| An area code overlay is when a second (or more) area code is created with exactly the same area served by an existing area code. Calls made in the area with area code overlays can no longer be made with just the seven digit phone number. Most overlays require at least the area code to be dialed also, meaning at least ten digits must be dialed. It seems that a few overlays also require a 1 before every number, just like calling outside the area code, though this is not the usual case. (I've tested the one just added here, and numbers dialed without the starting 1 don't work)
They are supposedly implemented by the phone company when the entirety of numbers available to assign have been assigned. When no new blocks of numbers are availble, they are forced to decide between splitting the area code into two separate area codes, or adding an overlay area code. Often, an area code overlay is done because of concerns of the cost and effort required to change signs, stationery, and such, since a sizeable portion of numbers would change with the new area code. With the overlay area code, no existing numbers are changed, just the method needed to call them from inside the area code changes.
The big issue is that due to the methods of phone number assignment, rules and regulations on the telephone industry, and, as some would say, hoarding of numbers by phone companies and businesses, usually the numbers are not truly exhausted - in January 2001, for example, the 847 area code, covering a large section of the Chicago suburbs, was given an overlay area code of 224. However, at the time this area code went into effect, approximately only 48% of available numbers were actually in use - over half of the numbers were dormant. Thus the claims of the necessity of the overlay are blatantly false and absurd.
The first area code overlay was put into place in 1996, and since then, 28 more overlays have been implemented - certain areas of New York City (Manhattan, Queens, and Bronx), for example, each have 2 overlays. | 
