Overselling is not a new concept. Every web hosting company that offers “unlimited” anything (bandwidth, disk space, etc.) is overselling. There is always a limit, even if they do not tell their customers. Their bet is that at least some customers, maybe even most, will not use up all the resources at once. It is a similar bet the bank makes in hoping that all its customers do not withdraw their money at once.
Is it wise to oversell VPS resources? That is a difficult question to answer. On the one hand, it allows you to put more customers on a node, thus generating more revenue. On the other hand, it is slightly dishonest, while not an outright lie. Most VPS customers want a VPS so that they can have a more dedicated server feel. With shared hosting, they expect to share resources with others. With a VPS, they expect those resources to be guaranteed.
If played carefully, you can get away with overselling VPS resources with no complaints from your customers. One slip up, however, can damage your reputation as a reliable host, especially if your overselling results in downtime for customers who thought they were getting dedicated resources. Ultimately, it becomes a percentages game. It might be safe to oversell 15 percent of resources but may be dangerous to oversell by 30 percent. You will have to decide on your own if it is worth the risk.