Right - it is the highest gear and the engine turns the slowest. The basic meaning of the word "overdrive" is that the transmission output shaft turns faster than the input shaft. Lower gears are "underdrive". there is probably a 1 to 1 gear "direct drive" and then an overdrive gear that may be for example 0.75 to 1. that means that the input shaft turns 3/4 a turn and the output shaft turns one full turn - it is "overdriven".
Historically manual transmissions have their top gear as a direct drive 1 to 1 through the transmission. this is accomplished by simply hooking up the input shaft to the output shaft so the engine power goes straight through. If a manual gear transmission has an overdrive then the power goes thru the counter shaft and the input gear is LARGER than the output gear to speed up the output rotation. Most "modern" automatics" are a series of planetary gear sets and may NOT even have a direct 1 to 1 gear. some automatics have TWO overdrive gears - for example a 0.9 to 1 and a 0.7 to 1.
As a practical matter to answer your question - in hilly country at speeds up to 50 or so - turn your overdrive "OFF". in slow or stop/go traffic up to about 45 in my opinion turn o/d off. on long downhill grades turn the o/d OFF to use engine braking and save your brakes.
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