The incremental copy feature used with the Copy Content tool finds a matching destination item using the Unique Key based on the source key properties. The Unique Key is defined and can be altered in the Map Properties option for a list. It is predefined for a library and can't be altered. To modify the Unique, select the Map properties option and changes the Key Properties.
When no match or multiple matches are found, Sharegate can't identify the right destination to update so a new item is created.
To avoid matching a different item with the same Unique Key in a different folder, each match are based on the hierarchy of the file or item. For instance, if you have a file named File.txt in the root folder of a document library and a file named File.txt under a sub folder named Folder, the incremental copy will search for a match for each files under the same scope or folder. This will prevent overwriting the file under Folder with the source file at the root.
Unfortunately, if you migrate a file or an item by navigating down to a subfolder in the Content Copy item explorer, it won't be recognized as the original source item the next time a copy is made from the root folder. For example if we copy File.txt under Folder, the next time we copy the entire library Sharegate will create a new File.txt at the root folder because it doesn't know Folder/File.txt is really File.txt.