The developer is referring to it that way as a type of mod (as opposed to injection, pure scripting, core, and whatever the others are), it's a programming term. Nothing is really supposed to go into the Mods\Overrides folder unless the developer specifically says "this file should go into your Overrides folder" or words to that effect. It's a pretty rare thing. This is of course not record breaking by any means but I have well over 1,100 package based files, prior to merging in the case of CC, of which almost 300 are actually mods, mod related, or scripted objects, and have a grand total of 2 in Overrides as per such instructions.
The purpose of the Overrides folder is to force what is in there to load later in the startup process than other package files and thus have higher priority. This is used when a mod or scripted object relies upon the resources of another package file to be there but would otherwise conflict or malfunction if they loaded in the wrong order. It is not needed for those that "override" game file resources.
Example: A scripted object mod that functions as a stationary exercise bicycle and ties its usage to the Athletic skill might rely upon a particular custom bicycle and its animations (a different file) to work. The script cannot load if the reanimated bicycle object isn't there first, so the developer would likely instruct users to put the bicycle object file in Packages like any other but the script mod file in Overrides.