Hi Lis, welcome aboard!
If you “overwrite”, then all the people and households are deleted before the CSV is processed. That will be an issue if you have set up small groups, rotas (schedule if you are from the US!) etc – because they store the id of the person rather than the name, which may change.
If you don’t overwrite, the import will check each person and import them if not in the directory already – thereby not breaking rotas and small group leadership and so on.