Airlines have been data mining for a very, very long time now and have a reasonably guess of the ratio of people booking vs showing up at the gate to fly. So you set your buckets to oversell by that much and assign seats later. If more people show up than expected than you throw them a voucher to go away. Hopefully enough will.

Sometimes it doesn't work out and that's when airlines bleed. I was flying home one day from some US city (was it Denver? the years and cities blend together) when a Drupal conference and some major sports thing ended the same day and the airport was a total gong show. United first offered a paltry 120 USD but when they raised to 400 USD to go home the next day instead my hand went up -- and I was such a greenhorn I didn't know they will pay for the hotel, too. A buddy pocketed no less than 1200 USD from Delta.