Operator overloading allows operators like + and << to be used with user-defined types like classes. It is done by defining corresponding member functions for the operators. For example, to overload + to add two Sale objects, you would define a member function called operator+(). This allows sale1 + sale2 syntax. Similarly, << can be overloaded to allow output to cout. Overloaded operators must follow certain rules regarding arguments and precedence. Postfix operators require an additional integer argument to distinguish them from prefix operators. Overloaded operators allow user-friendly syntax when working with custom data types.