The overwrite policy is applied when a file already exists on the destination.
Files on the destination are never overwritten. As long as this option is selected, the destination only contains the first version of each source file.
Overwrite if source file is newer
Files on the destination are only overwritten if the modification date of the source is newer than the modification date of the destination. When editing a source file, the modification date is automatically set to the current date and time, which then causes the file to be synced again. When replacing a source file with an older version that has an earlier modification date, that version will not be synced until editing it again.
The maximum time tolerance setting defines the maximum allowed time difference between two modification dates to be considered equal. The default is 2 seconds. When syncing two volumes that have the same format, a value of 0 should be fine, but when syncing two volumes with different formats, there might be issues caused by the different time resolution. For example, FAT32 only has a time resolution of 2 seconds; in a sync from an APFS volume to a FAT32 volume with a time tolerance of 0, many files would be constantly listed as having changed; the reason is that the timestamp saved on the FAT32 volume cannot always be saved as it is on the APFS volume.
Overwrite if timestamp or size is different
Files on the destination are overwritten if the modification date or size are different from the source.
The maximum time tolerance setting is applied here as well.
Files on the destination are always overwritten, regardless their modification date or size has changed or not.