See how the thread wraps around the raw edge?This is what the stitch icon looks like on my machine.Your machine will have a special foot for the overlock function. On a Bernina it looks like this:The red arrow points to the pin, which you align with the raw edge of your fabric. The pin keeps the fabric flat and allows the thread to wrap around it.
Since my serger needs to go to the shop, I used my overlock stitch to finish the raw edges of some fabric before pre-shrinking it in the dryer. The overlocked edge held up just as beautifully as a serged edge does!