It's really your call on this one.
Generally you would be correct in your concern for weather or not hiding information is a bad thing. In your case however this is debatable. Take the images, for example. Those images are designed to draw the end-user's attention towards the element, and get them to click on it. By the time they hover over the element, your graphics have already served this purpose, thus providing thin with additional information which then allows them to decide if they absolutely want to click on that item.
It's not a bad practice at all, perhaps it feels clumsy or a poor experience itself.
Although I was thinking, it is not good to only show text when a user hovers. It turns your user experience into one of those card games where they must look again if they forgot "where that thing was" and I don't think that helps the users much.
An idea I have:
If your text for each item is so short, how about aligning it to the bottom and applying a gradient that fades past the top of that text? The gradient wouldn't cover the whole photo and should be partially see-through. Then make that text/gradient overlay fade upon hover.
Here I have created a gif example of what I am describing:
(Golden Bokah image source: https://www.youtube.com/watch?v=DzVnGQ8KBmE)
I'll post the following just in case giphy looses the animated gif so that others can see the concept:
So to answer your question, which is a question of opinion (in my opinion): yes, an image overlay can be too obstructive if your intention is the preservation of information on the screen for the end user.