How should I set the overlay and home options of livecd-iso-to-disk ?

[Linuxguy123]

I've been using the livecd-iso-to-disk utility to make F10 KDE4.1.8x
Live USB installations.  It works pretty well. 

But I am not exactly sure what a couple of the options mean.  I'm just
using them. 

Here is the wiki:
http://fedoraproject.org/wiki/FedoraLiveCD/USBHowTo


Here is what the usage info tells me:

=====================================================================
# livecd-iso-to-disk
/usr/bin/livecd-iso-to-disk [--reset-mbr] [--noverify]
[--overlay-size-mb <size>] [--home-size-mb <size>] [--unencrypted-home]
<isopath> <usbstick device>
=====================================================================

>From the man pages:

=====================================================================
LIVECD-ISO-TO-DISK(8)            LiveCD Tools
LIVECD-ISO-TO-DISK(8)

NAME
       livecd-iso-to-disk, install livecd-creator images in usb stick

SYNOPSIS
       livecd-iso-to-disk [--reset-mbr] [--noverify] [--overlay-size-mb
<size>] <isopath> <usbstick device>

DESCRIPTION
       livecd-iso-to-disk converts a live cd or dvd image into a
bootable USB stick. This is not a destructive process; any data you
currently have
       on your USB stick will be preserved.

OPTIONS
       --reset-mbr
           Resets Master Boot Record of usb stick by copying syslinux’s
mbr.bin.

       --noverify
           Disables image validation before installing it.

       --overlay-size-mb
           Overlay’s size in megabytes. Note that you’ll need to have
space on your USB stick for the live image plus your overlay plus any
other
           data you want on the stick.
...

===========================================================================

The command I am actually using is:

# livecd-iso-to-disk --reset-mbr --noverify --overlay-size-mb 100
--home-size-mb 150 --unencrypted-home
--delete-home /home/xxx/Download/f10-kde-4.1.85-3/livecd-f10-kde-4.1.85-200812181534.iso /dev/sdc1


I don't understand what the overlay is and what is stored in it ?

Does the home directory reside within the overlay or is it outside it ?

On a 4GB USB drive, how large should I make /home and overlay ?

Thanks