Overdraft is a facility that gives you an extra amount to use if your account reaches zero. This is a flexible way to deal with additional expenses that can happen.
So, if your balance is 1000 EUR, and your overdraft is 200 EUR, you have access to 1200 EUR in total. Any money added to the account automatically clears the overdraft and once repaid that amount is available to use again.
Interest is calculated daily on the amount of overdraft that you use. The accumulated interest is charged monthly to your account.