Vishal, Overflow is the condition when result produced by addition cannot be stored in space allocated. Say You Want to add $2$, 4-bit numbers, then if result produced after addition is 5-bit, then we cannot fit the result in 4-bit, And we say Overflow has happened.
In 2's complement representation $0111 = (7)_{10}$ And performing addition : $0111 + 0111$. Result obtained is $1110 = (-2)_10$, in 2's complement representation not $14$ which should be answer. But there is not way we could represent $14$ in 2's complement representation in 4-bits. So Overflow.