Republishing in full not allowed without permission from Neerav Bhatt.
Airlines in the USA often sell more tickets for a flight than there are actual seats available for passengers. They make the bet that a certain percentage of people will miss the flight because of changed travel plans, ill health, missed connecting flight, checking in too late etc.
However sometimes all the people who paid for a ticket turn up for a flight. Yesterday I was due to fly from Los Angeles to Sydney on Delta and 270 passengers checked in.
The Delta Boeing 777-200LR plane only has 269 seats so the gate staff announced that if someone voluntarily gave up their seat (got bumped) they would offer to switch them to a code shared Virgin Australia flight in 22 hours, give a $600 Delta gift voucher, airport hotel accommodation while waiting and $30 in meal vouchers.
I decided to be that volunteer to see what the experience was like and because it made sense for me as Delta paid for an OK airport hotel with AT&T WiFi access for 24 hours. I’m sitting in my hotel room working on my laptop and my next trip to the USA is $600 cheaper 
Tips – Overbooked Flight Bumped Compensation
In the USA airline passengers who are involuntarily bumped from a flight are protected under Federal Aviation Administration guidelines that specify how much compensation you get depending on the length of time the flight is delayed. If you are involuntarily bumped from a flight make sure you request the gate staff for a printout of what the DOT mandates they have to offer you, before you make a deal with them.
Airlines have to ask for volunteers and offer them some kind of incentive to give up their seat before they choose who the least priority checkedin in passengers are to cancel their ticket and give them financial compensation.
If you volunteer to be bumped, your agreement with the airline is not regulated and will depend on negotiating with the airline staff at the gate as to how much value in flight vouchers you get, whether you get hotel accommodation, a seat upgrade on the next flight and how many meal vouchers you get (if any).
When you checkin luggage at the airport ask the staff if the flight is full. Make sure you are seated close to the desk at the airport gate in case they ask for volunteers so you can be the first one to be in line. Be polite and make it clear to the airline staff that you are a reasonable person trying to solve their problem and they might improve the deal, especially if not enough people volunteer.
What is your time worth to you? Volunteering to be bumped off a flight will make more sense for a single traveller with flexible plans than a family of 4 on the way home from a holiday or a business executive who needs to attend an important meeting at the destination after landing.
Once you agree to volunteer and the gate staff are arranging the paperwork insist that your checked in luggage be deplaned and sent to the arrivals baggage carousel.
If you accept being voluntarily bumped and have travel insurance with a fixed start/end date call your travel insurance company immediately once you reach the airport hotel, request getting a few days added to the insurance period because you got bumped from a flight due to overbooking. My insurer Travel Insurance Direct added 2 days without any charge.
Is the new flight you’ll be booked on with the same airline? If it’s a different partner airline how do their planes and service compare? In my case Virgin Australia has newer planes than Delta and a good reputation for service so I had no issues with accepting the replacement flight.
Make sure the gate staff printout a confirmed seat on your new flight before you give up your existing checked seat on the overbooked flight, especially if it is an aisle or emergency exit row.
Once you reach your airport hotel call the airline customer service number to confirm any special needs or special meal on your new ticket especially if it is on a partner / codeshare airline.
Note that any meal vouchers you get from the airline will not be high value eg: $10/meal and will not include alcohol or be valid for hotel room service.
Lastly as a general tip: corporations rely on information asymmetry (they know more about the rules/protocols around a situation than you do) when dealing with the public. When engaging with corporations always be informed and keep an eye out for opportunities to wrangle deals in your favour.
Road Less Travelled Blog - Overbooked Flight Tips: Compensation If You're Bumped Off Plane