What the Overdrive itself does is save you gas by bringing the RPMs lower during normal driving. It's almost like having one more gear to your tranny.

If you're driving in hilly or steep territory, and you find that the truck is bogging down or frequently has to step down into 3rd gear (i.e. out of overdrive) to keep speed, then you should push the button to take it OUT of overdrive mode (that's when the O/D OFF light illuminates). What that does is keep your truck going in 3rd gear: no converter lockup or overdrive. This gives you more power for steep grades since it keeps the truck in the meat of its powerband, but kills your gas mileage for everyday city, freeway, or whatever driving.

So basically, only use that button if you're going up a steep hill or if you want to use the engine-braking effect to use your brakes less while going down a steep hill. Make sense?