A hedging contract in which a party swaps a predefined cash flow with a counter-party on a specific date is known as an index swap. For one side of this swap, the agreed exchange is a debt, stock, or other price indexes.
An overnight index swap uses a rate index like the federal funds rate or the London Interbank Offered Rate (LIBOR). Index swaps are a subset of traditional fixed-rate swaps that have periods ranging from three months to more than a year.
It’s an interest rate swap where the floating leg is an overnight rate (e.g. Fed Funds).
For operational convenience it is often not desirable to exchange payments on the swap every day. So usually what happens is the overnight rate is compounded each day but payments happen less frequently (e.g. quarterly).