An onlay is a restoration made of gold or porcelain that fits over a portion of the top of a tooth to protect it from fracturing. This is very similar to a crown, except it does not cover the entire top or biting surface of the tooth. You may consider it a sectional crown. Therefore, an onlay is more conservative in nature than a crown, since it does not require cutting as much tooth structure. An onlay is placed on teeth that are at risk for fracture, yet still have some good, non-decayed, non-restored, solid, tooth structure remaining that is not at great risk for fracture. In this way, the weak part of the tooth is protected with an onlay, while the solid part of the tooth is left alone.
By doing an onlay, you preserve more natural tooth structure than doing a crown which keeps the tooth stronger and makes it less likely to require a crown in the future. Also, the less cutting that is done on a tooth, the less likely that the tooth will need a root canal. An onlay is better than just a filling like amalgam or composite, because it is made out of gold or porcelain, which are much longer lasting dental materials. By placing an onlay on a tooth, you are less likely to need more restorative work on the tooth in the future, which is better for your tooth, your time, and your money.