Are you looking to visually tag the user, such as drawing a box around their face? If so then yes, you will need to use the overlay feature.
If you want to draw an overlay onto the video, but the overlay image is not the same size as the video resolution, you can use some more advanced features of the transcoder to specify the actual x,y for the image to be drawn. If that is needed let us know and we can show you how.
Bryan