Physical sense: looking downward from a higher place, or a building or location having a view over something. The English 'overlook' here means 'have a view of,' not 'fail to notice.'
Figurative extension from looking downward at someone. For the direct meaning 'despise, look down on,' 見下す is often the more explicit verb; 見下ろす can sound image-based, as in an attitude or gaze from above.
