As I said elsewhere on this forum, overselling is an integral part of every hosting company's business. Anybody who claims otherwise is being duped, or is simply a reseller of another provider who is overselling to them.
A typical example of this was a hosting company we did *some* work for a couple of months ago. They had 3 or 4 servers in ThePlanet. Their hosting plans were simply silly. For $2/ month you got 1 Gb space and 20Gb bandwidth (or something nuts). They had no AUP. No concept of security and all their servers were bursting at the seams. Due to the lack of an AUP the servers had become a haven for spammers, warez traders, phishing fraudsters etc. One of the servers had approx 50k mails in the outgoing Q!!
What happened? They had to shut down.