Eddie's incorrect in saying that 'all' airlines do it.
Budget carriers (such as easyJet, Ryanair, etc) don't do it because their fare rules mean that 'no show' passengers don't get a refund. (The only time that a passenger should be denied a seat on a budget airline is when they've been forced to replace a large aircraft with a smaller one).
'Full fare' carriers though offer refunds to 'no show' passengers (or, at least, to those passengers who've paid the higher fares that offer such refunds), so that they book more passengers onto a flight than there are seats on the plane in order to try to end up with a full flight of fare-paying passengers after some people have dropped out. If everybody actually turns up they're then forced to 'bump' some travellers.
So, despite all the moans about budget carriers, you're often better off booking with them (rather than with full fare carriers) because you don't face the risk of being 'bumped'.