I think there's a lot of miscommunication in this thread
is very common and I see no problem with it, though some of the big hosting companies (Hostgator, Hostdime, etc.) do not allow it. If I sell 100 hosting plans with 5GB of disk, in theory I should have 500GB of disk sitting there. But we all know that lots of those 100 people will never use more than 100MB. Some will use their full 5GB of course, but as long as keep enough disk on hand so that people can use their 5GB, I don't think that's bad/unethical/bad business/etc. It requires capacity management, but it'd be foolish for providers to keep terabytes of disk around because of some imaginary moral obligation to keep enough free disk because suddenly everyone might use 100%.
A key point here is that the customer never knows or complains - there is no impact to the user.
Overselling server performance
is what was labeled overloading. That is definitely bad and that is not a good idea. In this case, the customer definitely knows and complains.