In a nutshell, a small voltage is sent across conductors in the overlay. When you touch the surface of the touch overlay, you are increasing capacitance for that spot as our bodies are natural capacitors. The capacitor reading is measured by a special IC designed to convert that reading into some binary/hex code. The reading will vary depending on how far the contact point is from the IC. An improvement on that is used in Iphones, Nintendo DS, etc. That improvement is instead of using one conductive surface, many rows and columns of conducters are placed in the overlay. None of the conductors touch as to give a much more accurate reading and enable multi-touch.
The conductors are almost always made of ITO (Indium tin oxide) because it is transparent. The overlay is a thin layer that is attached to an LCD with adhesive.
Coming back full circle, I'm looking for that overlay which I can apply to a suface to make it touch enabled. Eventually, I want to attach it to a LCD screen, but for proof-of-concept I want to attach it to a piece of acryllic.