Why does my hot water heater over flow

What do you mean by overflow? Where exactly is the water?

Do you see a pipe running down the side of the water heater? Is this where the water is? Or is it basically under the entire unit?

The pipe on the side is connected to the T&P valve (http://www.inspect-ny.com/plumbing/Water_Heater_Relief_Valve058-DFs.jpg) (Temp & Pressure), and water coming out of here would indicate a leaky valve or a temperature or pressure that is too high. The valve would vent the water to keep the tank from exploding.

If the water is not coming out of the T&P pipe, then the tank itself could be leaking. No fix here, have to replace the water heater. :(

Good luck,
WallyH