Yu-Gi-Oh Card Maker Wiki

An Xyz Material Counter ((エクシーズ)()(ざい)カウンター Ekushīzu Sozai Kauntā) is a counter used for monsters that state at least 1 Xyz Monster as a Material. Xyz Material Counters are, as their name implies, a substitute for Xyz Materials, as actual Xyz Materials can only be attached to Xyz Monsters. Xyz Material Counters can be removed or added to a suitable monster with card effects or to activate their own effects in order to replicate an Xyz Monster's playstyle. Not all monsters that require Xyz Monsters as Materials use Xyz Material Counters (such as Elder Entity Norden), but quite a few do.

Monsters that use Xyz Material Counters always have the following statement in their lore:

If this card is *insert secondary Type* Summoned: Place 1 Xyz Material Counter on this card for each Xyz Material the Xyz Monster(s) had when it was used as Material. If a card or effect that involves detaching Xyz Materials would affect this card, remove an equal number of Xyz Material Counters from this card.

In the anime, Xyz Material Counters are instead actual Xyz Materials, breaking conventional rules by having Xyz Materials attached to a non-Xyz Monster. When a monster that uses Xyz Material Counters is Summoned in the anime by its own type of Summon, that Summon is referred to as an Overlay X Summon, as while the Summon is taking place, the Overlay Units of the Xyz Monster used are overlaid around the new monster. Known variants of this sort of Summon are Overlay Fusion Summon (オーバーレイ(ゆう)(ごう)(しょう)(かん) Ōbārei Yūgō Shōkan) and Overlay Synchro Summon (オーバーレイシンクロ(しょう)(かん) Ōbārei Shinkuro Shōkan).