I'll try to make this simple, but its really not.
Theres only a certain amount of space on a server... maybe up to 500 gigs?
Well, when people purchase hosting, they only use a certain amount of the space they're given. Only about 10% of customers will actually fill up their hosting accounts. Some companies have taken advantage of this, and will not pay attention to how much they've sold, but instead- how much is available on the server. For example, If we sold a 20gb reseller, we would consider that 20gb of our hard drive is now not available to be able to be sold to anyone else, that person can do whatever they want with it, including leaving it empty. Another company would sell a 300gb hosting plan, and realize that they still have a certain percentage of their HD empty, so they keep putting more customers on that server. This is called "Overselling" (Selling more than you actually physically have). Companies that oversell can sell for cheaper, but the customers are packed tighter and tighter on a server, and you cannot use the amount of space you've purchased. If you come close to using that much space or bandwidth, they'll terminate your account and give you some BS reason.
Hope this clears things up.