Overlays are much like decals, in that they produce graphics that lay on top of brushes. They can range from rugs to graffiti to blood stains. Overlays, however, are more flexible and customizable than decals.
Firstly, you want to choose a texture that will be the overlay you are making. I recommend searching for 'overlays' or 'decals' in the texture browser. For this tutorial I'll be using 'overlays/rug001a'.
Once you've found a texture you want, click the overlay button in the toolbar, or press Shift+O. Then click where you want the overlay in the 3D view. You should get something like this:
Use the red box in the middle of the overlay to select it.
The first thing you'll notice is that only part of what was shown in the texture browser shows up in Hammer. This makes stuff like graffiti look especially impressive. So play around and see what shows up in Hammer when placing an overlay.
The second thing to notice is that you can resize the overlay just like a regular brush. Go back to the pointer tool and resize the overlay in a 2D view to do this.
You can also distort the overlay. Go back to the overlay tool and click and drag the little white boxes in the 3D view to distort the overlay, just like in vertex manipulation.
If you want to change the texture of the overlay, press Alt+Enter to go into the properties of the overlay, and browse for a new texture in the 'Material' keyvalue.
Other keyvalues to play about with are the U Start, U End, V Start and V End values. Increasing these values will make the texture tile in the same amount of space. Here I've changed the U End and V End values to 2. The overlay now has 4 of the rug textures in it.
Also, increasing the Start values higher than the End values will flip the texture in the overlay.
Another thing is the keyvalue 'Render Order'. This will enable you to overlap overlays and choose which ones to be on top.
You can overlap up to 4 overlays. Here I've put a blood overlay overlapping the rug over lay, and given it a Render Order of 1. In game the blood will be splattered over the rug.
Overlays will also keep their form over displaced terrian, another useful thing to keep in mind.
AcX
