I checked it out. Not 100% positive, but I don't think it's really an overflow issue. Using my webdeveloper toolbar, I outlined current elements on the yahoo page. When hovering over the said elements, it seems as it's a hover effect on a div.
The div is the same height as the top of the arrow point, but only has a plain white BG without a hover. When hovered over, the blue background with arrow shows up.
I did write a short tutorial on this, and actually use the effect on my new site I built, (don't want to put a link here because I don't want to seem like I'm spamming the forum).
Basically... create a div with a desired background. create an image that is double the width of the DIV. make the left half of the image what you want to see without a hover and the right half what u want to see when a hover is applied. Then just add a hover effect on the div where the image shifts left. I will look for my tutorial and post the link. or pm me to check out it's usage in effect.
EDIT:
html-tutorials/tutorial-creating-hover-effect-elements-using-css-t97597.htmlThere was a comment by righteous trespasser about just changing background color, but that's not what I'm trying to convey in the tutorial. There's a lot of neat effects that can be accomplished... even the yahoo "arrow".