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This report is located in the Content tab of Google Analytics. Instead of being a report like the others you have seen so far, the Site Overlay report actually opens a version of your site in another window. Over each link on the site, you will find a bar with a percentage amount, showing you where the highest concentration of clicks on the page is. When you mouseover the bar, you will see a total number of clicks along with a conversion amount of money earned if you have conversions set up.It is a great way to track the progress of your goals in any given month or time period chosen in the google analytics dashboard area before choosing to look at the Site Overlay report.
In order to find out how all the pages of your site are doing with the site overlay feature, all you have to do is move through the site clicking as normal, and each page will refresh with its own specific click data. Recording this data will help you see a pattern of how people move through the site, as well as how people move through the links to other sites or click on your ads.
So how does all of this help you? Well, if you see an area which is clicked often, you can move the content of your site which you think needs to get some more attention to that area. This will help you determine if the content itself is popular or if the layout of the site draws the users eyes and attention to that particular area. It will help you see how close to your conversion goals you are in the middle of the month to help you see if you need to step things up a bit.
You probably will not have to use the report much, but it is a nice feature to have around if you are curious.