A folder that exists within the game's directory. For KotOR, it is created during installation, but for TSL, it must be created by the user. The main function of this folder is that any file placed within it, so long as it is a file type and file name that the game recognizes, the game will use.
In the case of replacement, such as if a user edits a texture file that the game already uses, the game will use the .tga located within the override folder, versus the unedited version in the game's archives(i.e .Bif files).
Differences Between KotOR and TSLEdit
Aside for whether or not the folder is created during installation, there is another difference, mostly related to modding the game. In some ways, the difference is not really an issue, however, it can be, if one installs mods that may add a large number of files to the override folder.
For K1, the override folder is the only place where any files can be added. Such as, adding any texture file to the override, will cause the game to use it, in place of the archived version. However, if one would want to use an area retexture, but only to see if they like it, they cannot create a folder within the override to place it in.
[drive-letter]:/Program Files/LucasArts/SWKotOR/Override/ - Placing files here will work.
[drive-letter]:/Program Files/LucasArts/SWKotOR/Override/Mod/ - Creating this folder and placing files here will not.
However, for K2, this is opposite. Such as:
[drive-letter]:/Program Files/LucasArts/SWKotOR2/Override/ - Placing files here will work.
[drive-letter]:/Program Files/LucasArts/SWKotOR2/Override/Mod/ - Placing files here will work.
This difference aside, some files MUST be placed within the override folder to have any effect, such as 2da files.
Important note! TSL searches Override first, and then subfolders (in alphabetical order). So, if you have 2 files with the same name, one in override itself and one in subfolder, the game will use the one from override.