Why do airlines overbook their flights?
It may seem hard to believe, but each flight has a certain percentage of "no shows," passengers who book a flight, but never show up for a variety of reasons. For an airline, each seat that goes empty means lost revenue, not that there are that many empty seats these days. But the airline industry has such razor-thin margins that empty seats can cost big bucks to the bottom line. Revenue management teams watch the statistics very carefully to insure that the flights are optimized for maximum revenue and minimum inconvenience to passengers, but occasionally things go awry and more passengers show up for a flight than there are seats.
Exceptions to the rules
There are, however, a few exceptions to the bumping rule, in which case you may find yourself out of luck. If the airline must substitute a smaller plane for the one it originally planned to use, the carrier isn't required to pay people who are bumped as a result. In addition, on flights using aircraft with 30 through 60 passenger seats, compensation is not required if you were bumped due to safety-related aircraft weight or balance constraints. Also remember that these rules vary for international flights, even if they're on US-based carriers. Stronger protections exist for travel from the European Union, for example. Not sure where you stand with your airline? Check their contract of carriage. In fact, it's a good idea to print this out and have it with you for reference incase of such an emergency. Sure, it may sound unnecessarily nerdy now, but hey, it just may save you from sleeping on that row of chairs next to Gate 43A.