The file upload area is treated exactly like its own podcast.
This means that audio files you place there are treated on the app like new episodes, and are downloaded or streamed accordingly. You can add the Uploads “podcast” to playlists.
Most importantly: if the Overcast app on your phone is set to Delete Played Episodes, then once you finish listening to a file it is deleted from your phone and from the file upload area on the Overcast.fm website.