Yup.. that's how overselling works.. except in the more "ethical overselling" you are supposed to expand and scale up as necessary to prevent customers from bumping into each other and taking the server to the limits as a whole. If you can't meet the demands that you promise, then you aren't being very ethical as a host for what and how you are doing. Webhosting is easier to oversell, as you aren't physically promising certain system resources other than diskspace (hah, well, with like 99% of overselling webhosts out there -- at least the ones advertising "unlimited diskspace" -- are full of birdpoop when they make this promise). VPS is more risky. With the right schedule, with the right price (to customers), etc, overselling would work well and ethically. Unfortunately, the extreme majority of people in the business of overselling are all in it for quick/get-rich-quick/fast/cheap money.