DVD Studio Pro - About Overlay Files

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About Overlay Files

Whether you create simple or advanced overlays, the overlay must be a single flattened
layer, either as part of a Photoshop (PSD) format file or as a separate file.

It is common to have a single PSD file supply both the menu’s background and overlay.
The DVD Studio Pro Menu Editor allows you to select as many layers as you want to use
as the background, but you can only select a single layer as the overlay.

Note: Don’t confuse a PSD file with layers (used to supply the background and overlay)
with the type of PSD file used when creating layered menus. Standard menus contain all
buttons’ selected and activated states within a single layer of the file; layered menus
contain a separate layer in the PSD file for each button’s state (normal, selected, and
activated). These layers are not overlays that you assign colors to—they are full-color
images of the button in one of the three states. See

Creating a Layered Menu

for more