If you have 5GB space, you can add 5 accounts with 1GB space each or 10 accounts with 500MB space.
If overselling is enabled, the disk space is calculated based on the used space of your accounts. This is why with overselling enabled there is a limit of the number of cPanel accounts you can create. With overselling enabled, the maximum space you can assign to a new account is the free space remaining in your reseller account. For example, if you have 5000MB space and you created 5 accounts and each of them was given 2000MB space you can still create more accounts as long as those 5 accounts didn't use 5000MB space. If the 5 accounts used 4000MB space you can create a 6th account but the maximum space you can assign to it will be 1000MB since 4000MB were used by your other accounts.
Basically, with overselling enabled you can create as many accounts as you want until you reach your number of cPanel accounts limit for your plan or run out of free space.
Some clients prefer overselling to be disabled since they host multiple small web sites with very low space requirements and they can control the space they use themselves. Some clients prefer overselling to be enabled when they want to give their clients more space than they have available in their reseller account so that they can be still competative on the market and use the fact that not all customers will use 100% of the space you gave them.
At WHP Hosting, we allow our clients to choose the best way for them and have overselling enabled or disabled while most providers will only allow overselling to be either enabled or disabled and you can't have the other option. With us, you can have one reseller account with overselling enabled for hosting customers which you want to assign more space to and one with overselling disabled where you can host multiple small accounts.
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