so if the light is on the over drive is off.
yes.
Pintara Auto Drive Ratios
1st - 2.785
2nd - 1.545
3rd - 1.000
4th - 0.694 <-- O/D
With overdrive OFF the light (as said) will come on to annoy you, and the box will not go past 3rd gear.
It's called overdrive as the gear ratio for 4th gear is below 1. All of the others are above 1. These low gears are what amplify torque/power that gets to the wheels (Launching in high gears = sluggy or doesn't work at all) - however the engine will rev out quickly at lower speed, hence the need to change gears. Any overdrive gear (4th in our autos and 5th in our manuals) will have crap acceleration but allow the engine to tick over at low rpm whilst at high speed - if you were still in say 2nd or 3rd you'd be redlining the thing.
Well, thats common sense really. Having overdrive on will allow the car to gear into 4th when cruising at speed, for better fuel economy, and presumably less engine thrashing and noise. if it's a problem, say you encounter a really steep hill or towing, you can turn OD off to force the box to not exceed 3rd gear. Much like putting it in 2 makes it not exceed 2nd gear, or putting it in 1 makes it not exceed 1st gear.
Go for a drive, get up to 100km/h somewhere, and switch between OD on and off if you want to experience it for yourself. I havn't done more than 2 hours driving total ever in an auto and I know all of this, it is not complex.
Short answer: OD on = 4 useable gears. OD off = 3 useable gears.