If you have a task of one day duration and assign one resource at 100%, Project calculates the work = duration * assignment units.

So, 8 hours of work for one resource at 100%. So now you decide to assign two hours of overtime. By assigning overtime project subtracts the 2 hours of overtime from the 8 hours of "regular work" equaling 6 hours. The definition of a day by default is 8 hours (set in Tools > Options, or File > Options in 2010). So there are now 6 hours of regular work and two hours of overtime. The 6 hours are now used to recalculate duration.
6/8 = .75 days

Again, there is a significant difference between assigning overtime and tracking overtime. If you originally had the resource scheduled for 8 hours of work and you enter 10 hours of actual work, Project will increase the assignment units. If you enter 8 hours of Actual Work and 2 hours of overtime, the assignment units will stay at 100% without triggering an overallocation.

It really does matter where you add the overtime and whether you add it to the Overtime work field or Actual Overtime Work.

I hope this helps.

Julie