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An overlay network is a virtual computer network that is built on top of another network. Nodes in the overlay network are connected by virtual or logical links. Each link corresponds to a path, perhaps through many physical links, in the underlying network. The topology of the overlay network may (and often does) differ from that of the underlying one. For example, many peer-to-peer networks are overlay networks. They are organized as nodes of a virtual system of links that run on top of the Internet.^[11]

Overlay networks have been around since the invention of networking when computer systems were connected over telephone lines using modems, before any data network existed.

The most striking example of an overlay network is the Internet itself. The Internet itself was initially built as an overlay on the telephone network.^[11] Even today, each Internet node can communicate with virtually any other through an underlying mesh of sub-networks of wildly different topologies and technologies. Address resolution and routing are the means that allow mapping of a fully connected IP overlay network to its underlying network.

Another example of an overlay network is a distributed hash table, which maps keys to nodes in the network. In this case, the underlying network is an IP network, and the overlay network is a table (actually a map) indexed by keys.

Overlay networks have also been proposed as a way to improve Internet routing, such as through quality of service guarantees to achieve higher-quality streaming media. Previous proposals such as IntServ,DiffServ, and IP Multicast have not seen wide acceptance largely because they require modification of all routers in the network.^{[citation needed]} On the other hand, an overlay network can be incrementally deployed on end-hosts running the overlay protocol software, without cooperation from Internet service providers. The overlay network has no control over how packets are routed in the underlying network between two overlay nodes, but it can control, for example, the sequence of overlay nodes that a message traverses before it reaches its destination.

For example, Akamai Technologies manages an overlay network that provides reliable, efficient content delivery (a kind of multicast). Academic research includes end system multicast,^[12] resilient routing and quality of service studies, among others.