Where would we be without it?
You wouldn't see any of the crazy 2TB monthly transfer for $1 plans.
The VPS industry as a whole wouldn't be even a fraction of what it is. Could you imagine all VPS plans priced out to the average Xen provider's pricing? Even Xen can be oversold, just not on Ram (to my best knowledge - haven't worked with it in quite some time)
Dreamhost has a great blog post about overselling,
http://blog.dreamhost.com/2006/05/18...t-overselling/
It's definitely worth the read.