Umlaut is the name of the dots over certain letters in the german written language for example Ü Ö Ä. Since moving to germany I have found that umlauts can be pretty cool when it comes to typography, as it allows for some fun experimentation.I have also seen umlauts been used in london. For example there is a pub in covent garden called bünker. And they use the umlauts as much as they can in menues etc. even though they are completely wrong, they just think it looks cool.
Typographically there can be a problem with umlauts. Especially if you have a tight leading. The “problem” with umlauts especially shows itself when you use it on capital letters as it goes over the max hight of the letter. as seen here: ÄÜÖ – AUO. I believe it’s not so much a problem as it is an opportunity to make something interresting with those “excess” dots. I have seen some cool versions of this around in germany, like putting the umlauts under the letters and inside etc.
I made a little visual experiment. I’ve taken the liberty of altering my name Magnus to Mägnüs, for the sake of this experiment.