overflow: hidden is a CSS property that tells an element to clip any content that extends beyond its own boundaries. Anything that would visually extend outside the element's edges simply doesn't render. It disappears, not because it doesn't exist, but because it's being hidden.
It has 2 common legitimate uses: cutting off content that's intentionally meant to stay within a bounded area, and clearing floated elements inside a container. The problem is that overflow: hidden set on a parent element affects all of its children, including ones you didn't intend to clip. A dropdown menu that extends below its navigation container gets cut off. An image with a slight overflow for visual effect disappears. An element positioned slightly outside its parent for design reasons vanishes.
The element exists in the page source. Your browser can see it. CSS is simply hiding it. Loupely Lens's ancestor traversal looks for overflow: hidden on parent containers when you click an element that's being clipped or cut off, and names the specific container responsible.