What does it mean to be overqualified? Help here please

Hi everyone. Just a quick question as I don't fully understand what this is about. Recently I accepted an offer from a top LO AM company in London as a graduate analyst, which is the firm's rotational programme for recent graduates.

The recruiter recently talked to me, she said there's a "consensus" I'm overqualified for the job, but still valuable to them. She said if I'm fine with it they'll be extending my internship for a larger period and try and see if I can fit the graduate programme. According to her the point is to make it as intensive as possible to see if I'm a good fit for analyst right away.

I tried to ask her exactly what she means by overqualified but she just kept going over it and said nothing useful. This is strange to me, I've never seen it happen. To my knowledge overqualified is basically an embellished way to say you're rejected, in this case it sucks because I already took the offer over a SS ER job.

What do I make of all of this? I have a call with her next Monday