Why overlap exists
Meaning does not respect chunk boundaries. A sentence split across two chunks appears complete in neither, so neither embedding represents it and it becomes effectively unsearchable — a silent hole in the index.
Overlap guarantees that any given sentence appears whole in at least one chunk. The duplicated text marked in the output is what buys that guarantee.
What it costs, and where the ceiling is
Duplication raises the total token count of your index, which costs embedding money once and storage money permanently. Ten to twenty percent is the usual range and the cost is modest.
Above roughly twenty percent a different problem appears: near-duplicate chunks crowd each other out of the results, and a top-five becomes five views of the same paragraph. That is a retrieval quality loss, not just a storage cost.