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This is a very simple effect with only a few options to set. It is often used as part of a style to set the color that will be applied as the layer’s fill.
color overlay dialog
If you look at the deconstructed Layers palette at the bottom of the page, you will see that the Color Overlay consists of a filled layer, blend mode Normal and Opacity 100 %, added above the layer to which the effect is applied. It is grouped with that layer, and thus clipped, which means its visibility is limited to the outlines of the underlying layer’s content.

In the example below, I changed the color from the default (bright) red to blue since my example image uses red. I also lowered the opacity so you could see a little bit of the original layer. Settings used are shown, first.
example settings for color overlay

And, here is the Layers palette after the effect was deconstructed by choosing Layer > Layer Style > Create Layers.
  Go to Gradient Overlay
 
 

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