Here's a good way using :after on the image div, instead of the extra overlay div: http://jsfiddle.net/Zf5am/576/
<div class="image">
<img src="http://www.newyorker.com/online/blogs/photobooth/NASAEarth-01.jpg" alt="" />
</div>
.image {position:relative; border:1px solid black; width:200px; height:200px;}
.image img {max-width:100%; max-height:100%;}
.image:hover:after {content:""; position:absolute; top:0; left:0; bottom:0; right:0; background-color: rgba(0,0,0,0.3);}