coolant reservoir?

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ok, i've searched five pages under 'coolant' and i can't really find an answer to this question:

what function does the coolant reservoir provide?

what i mean is, the manual says to make sure the reservoir is between the 'low' and 'high' lines. it says to add directly to the reservoir. however, i read where some people put coolant directly into the radiator cap. does the reservoir store coolant that needs to escape the radiator or does it hold coolant that the radiator needs once it runs out of what is in the actual radiator?

i know this sounds like a fairly basic question, but i just filled(actually 'over-filled') the reservoir and was wondering if this will harm the engine in any way? it's a good 3 inches or so over the 'full' line, but still not to the funnel-part of the reservoir. it was kind of dark in my garage and i didn't see the level until it was too late. also, why not just put coolant directly into the radiator instead of a reservoir? btw, i'm using the official toyota long life stuff. thanks!