what is the advantage of using overtype? it doesnt seem to me to be any easier than highlighting text and typing over it.

It's just another way of replacing text. Highlighting & overtyping, as you suggest, is one way, but it involves two steps: (1) highlighting, and (2) typing. With overtype mode there's only one step, but other drawbacks, such as forgetting that you're in overtype mode. I see overtype mode as an extra little spell you can carry in your Harry Potter bag of tricks, which might occasionally be useful.