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How can I get rid of this overlay that says + Background? Is this some sort of feature or bug? Thanks.
Sorry that you're facing issue working with Photoshop Libraries.
Which version of Photoshop are you using and what is your operating system?
Please ensure that your Photoshop Libraries are synced completely and you have the latest version of Photoshop.
If the Library panel is stuck and not loading, please checkout the steps mentioned in this article https://helpx.adobe.com/creative-cloud/kb/creative-cloud-libraries-panel-doesn-t-load-in-desktop-pro... and let us know how it goes.