This page consists of 27 tests of nested divs with different position settings. All the divs have overflow: hidden. Absolutely positioned divs are red, Relatively positioned divs are green. Staticly positioned divs are blue. Parent divs are narrower than children divs, and children divs are narrower than grandchild divs.
You may think that, since all the divs have overflow: hidden, the child and grandchild divs would be clipped to the parents, but that's not the case.
In Firefox 2, everything is clipped except for absolutely positioned divs in staticly positioned divs.
In IE7, everything is clipped except for absolutely positioned or relatively positioned divs in staticly positioned divs.
In IE8 beta 1, things are a little more complicated. Absolutely positioned divs are never clipped. Staticly positioned divs are always clipped. And relatively positioned divs are only clipped when they're a child of a clipped div.