The Overworld is a macro-view of the game world, one which the player can move through freely in order to travel to different areas or levels of the game. It had its beginnings in older RPGs, where player would be able to travel between otherwise disparate areas of the game world quickly. The system was also a great fit for 2D sidescrollers, showing up in the Mario Brothers franchise, where it acted more like a level select screen, showing which levels were open to the player. Beating a level will often open up a branching path in the Overworld, allowing the payer to choose where to go next.
*The Overworld is not to be confused with a World Map*