I hear most airlines "overbook", on purpose...what does it mean and what are the ramifications if it indeed is "overbooked" on the day? People get free upgrades?
Most airlines overbook due to the fact that not all the passengers turn up for the flight. Understanding and analysing these patterns is a huge part of any airline's business. If they can get it right then the plane will fly close to full; get it wrong and they will have to dish out involuntarily denied boarding compensation for passengers that are bumped.
Some airlines will upgrade (op-up) passengers on the basis of status in order to make room in the cabin, so Gold pax on a full fare PE ticket will be first in the queue for a visit to Upper Class.
However, other airlines are notorious for almost never upgrading on this basis: SQ is the obvious example. Whether this is because they don't want to devalue their premium cabins, or whether they have much better software I couldn't say.
BC