In the Ionic React 5.6 update, new overlay hooks have been introduced to simplify the process of using overlay components like alerts, modals, and toasts in functional React components. Previously, managing state and callbacks for these overlays posed challenges, particularly when the action to display overlays was outside the component or required state management across different parts of an app. The new hooks, such as `useIonAlert`, provide a more intuitive approach by returning show and hide methods, similar to `useState`, making it easier to manage overlay visibility without additional ceremony. This update allows developers to use overlays more naturally, including from within custom hooks, by passing options through method parameters or objects, enhancing flexibility and ease of use in React applications.