When to use regular Overlays / Interactive Component with the Overlay as a Variant?

I’m still pretty new to UI/UX design and am trying to get a good grasp of the best practices before setting up the design system for an elaborate website design I will be working on.

In the Figma Office Hours video for Interactive Components we see examples that would normally be tackled with the prototyping Overlay option. Like a mouse-over tooltip and a drop-down menu.

Does this imply it is now best practice to have these set up as Variants? Or are there cases where using the original Overlay prototyping option is still preferred?

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