@awa: you've basically got the idea. I'd just refine it a bit to better reflect design intent.
1) We usually need inelastic response in order to dissipate seismic energy.
2) Inelastic response implies damage so we want inelastic response concentrated in certain places where that damage will not result in instability and hopefully be straight forward to repair. Typical choices are plastic flexural hinges in shear walls and moment frame beams and axial yielding in cross braces.
3) Seismic demand on our structures generally hits the lateral force resisting system first and then flows out to the collectors, diaphragms, gravity framing etc. By dealing with the bulk of the energy dissipation in the lateral system, close to the source (foundations), the structure further down the load path is shielded from having to sustain significant damage.
4) The primary way that we ensure inelastic damage is concentrated in the locations where we want it is by a)using R factors to ensure that these locations have nowhere near the strength required to resist the elastic level earthquake response and b) ensuring that these locations can sustain cyclic, inelastic damage without creating instability.
5) As designers, our goal generally is to keep our diaphragms and their connections to the lateral systems elastic. Two of the reasons for doing this are a) it's often hard to design collector/diaphragm path to be highly ductile and b) if our diaphragms yield then our assumptions about load distribution between lateral elements goes to hell in a hand basket and we may lose the ability to stabilize our gravity columns.
6) We do our best to ensure elasticity in the structure beyond the designated inelastic zones by designing the important parts of those systems to a load level intended to represent that corresponding to complete, whole system mechanism formation (the point where the structure would stop absorbing additional seismic load).
7) Recognize that elastic earthquake loads reduced by R represent the load at which the first designated inelastic zone in the structure yields. The structure as a whole does not yield until all of the designated inelastic zones yield which will occur at a load significantly higher than (Elastic Level EQ / R). How much higher? ((Overstrength - 1) x 100) percent higher.
In summary, we use overstrength factors to increase the seismic load to maximum level we expect to see in the system and thereby ensure that the critical parts of the structure structure beyond the designated inelastic zones remain elastic. It is, of course, a rough science.
I like to debate structural engineering theory -- a lot. If I challenge you on something, know that I'm doing so because I respect your opinion enough to either change it or adopt it.