The override directory inside the goomod file contains files that the addin provides or replaces. These can either override default files, or be entirely new files. Within this directory are files to override relative to the World of Goo installation directory.
For example to override the main body image of the Drained ball, the path relative to your addin zip file would be /override/res/balls/Drained/body.png
It is illegal to override a file in the World of Goo directory itself, and GooTool will not load the addin if it has files directly inside override.
Note that if you replace the same file that another addin does, the file will end up being overridden by the addin that has priority (as selected by the user by dragging the addins around).
The override directory is NOT the place to put XML (compiled or otherwise). Use the merge directory for this.
For Mac compatibility, ".png" files in the override directory are treated specially. They are automatically compiled into the Mac version's ".png.binltl" format, thus producing the same effect as on the PC version.