First, you must follow the steps to generate and apply a Steam key.
Refer to this FAQ: https://support.iracing.com/en/support/solutions/articles/31000165400-how-to-generate-a-steam-key
Then, to enable usage of the Steam Overlay in the simulator to interact with Steam friends, record time played, etc, you must open iRacing to the General Settings page. From there, you can simply toggle on the option labeled “Allow Steam Overlay in Simulator”
Please note: this will not work with iRacing Web.
You must have iRacing installed and open the iRacingSimUI.exe program to toggle this on.
To record game play time within Steam:
1: Steam needs to be running
2: You need to launch iRacing through Steam
3: Your Steam install needs to be on the same drive as the iRacing install
4: Make sure the Steam overlay is enabled within the iRacing UI
If you have done all of these things and you are still unable to record play time, please reach out to Steam Support for further help.