I think the idea was that:
Temperature overlay:
Shows your current tire temperature
Blue for cold, green for optimal
Your tires are almost never blue, even when you leave the pits and they tell you that you are on cold tires
but if you spin and stay stopped to let traffic pass they will turn blue.
Damage overlay:
Shows the current tire wear
White for ok, black for puncture, yellow for slightly worn, orange for even more worn, I do not know if there's a red because I have not gone that far.
I understand why they put them on different overlays, they probably thought they were making it neater, but they could have figured something out to have one overlay. I honestly don't understand why there are two overlays in the first place. Besides the tires, no part changes on both overlays as far as I am aware. Maybe the engine? They could have figured something out, who cares about tire temp when they're blown out? Also if they're worn changes are they are warm anyways.
I like having the damage overlay open all the time, but anytime I heat my engine up or it gets cooled back down again (aka always) the stupid overlay for temp shows up and then it closes and does not put the damage one back.
These are little things though, hopefully our feedback will make for a perfect 2011 game. This is technically a 1st gen product.