What is the purpose of the Overlay option when using the Clone Stamp Tool? When and how should it be used?
The Overlay option of the Clone Stamp tool shows the clone source area (the area you are going to sample) floating over your original image. This allows you to see precisely how the source area aligns with the original. This option helps with the cloning process -- no more cloning from the wrong spot or cloning unnecessary detail.
Once you bring up the overlay dialog by clicking on the Clone Overlay button in the Tool Options bar, you tell Elements you want this feature turned on by selecting "Show Overlay". Once you have done that, you can adjust the overlay to your liking. (NOTE: In earlier versions of Elements you click on the two overlapping squares in the Tool Options bar.)
Auto-Hide -- If you find the overlay to be a bit distracting while cloning, you select this feature. Auto-hide makes the overlay disappear when you click. The moment you release the mouse button, the overlay is displayed, thus allowing you to check what you just did.
Clipped (available only in more recent versions of Elements) -- You select this to restrict the overlay to within the boundaries of your brush. This will make the cloning process easier and more precise.
Invert Overlay -- If you select this feature, the overlay colors and tones will get inverted.
NOTE: The Clone Stamp Tool and the Healing Brush share the overlay option, i.e., whichever settings you select for one tool will apply to the other one.
Elements 7,10,11,12,13,14,15 - Photoshop CC 2017 - Lightroom CC 2015 Windows 7 Pro & Windows 10 Pro