Over booked flights are a part of the airline business. The no-show factor is so high, that airlines justify selling more seats than are available on a plane in order to ensure that seats are filled, and profits are made.
Most situations are resolved through a voluntary bumping process. Passengers agree to not travel on a particular flight in exchange for a package that the airline is offering. This could include hotel and meal costs, free tickets, or anything else that an airline may be offering as an inducement not to fly.
The involuntary process is a nightmare. It creates stress for the airline employees, and they are not the people who have made the decision to overbook a particular flight. It results in angry passengers, and can cause them to miss connections or lose deposits on vacations.
USA Today reports how a recent involuntary bump resulted in a small claims court decision in favor of the passenger:
Thatcher A. Stone, an aviation lawyer, was awarded $3,110 by a Manhattan judge for his expenses and inconvenience after he and his 13-year-old daughter were kept off a Continental Airlines flight at Newark Airport on Christmas Day 2004.
Read the full story for details.
On a personal note, I had friends who were flying out of Newark that day, and they said it wasn't a pretty scene.