Sometimes SDN leverages various overlay networking technologies to create layer(s) of network abstraction. What describes an overlay network?

This describes the underlay (physical) network where packets traverse physical switches and routers without additional virtual encapsulation, which is the opposite of an overlay.

Overlay technologies such as VXLAN, GRE, and NVGRE encapsulate the original packet with additional headers at the ingress node and strip them at the egress node; this encapsulation-at-source and decapsulation-at-destination mechanism is the defining characteristic of overlay networking and inherently introduces additional packet overhead.

Packet delivery reliability at Layer 3 and Layer 4 characterizes the underlay network's forwarding responsibilities, not the encapsulation abstraction that defines overlay networks.

NAT- and VRF-based segregation are underlay or physical network techniques for traffic isolation; overlay networks abstract above these constructs using encapsulation rather than relying on them for segregation.