There are numerous reasons for the water in a pool to overflow. If the water level is too high, it will be more susceptible to spilling over due to splashing. If people routinely jump into the pool, especially performing cannonballs, some pool water is bound to overflow. Likewise, plenty of splashing, games and water fights can lead to the pool losing its water. Though not common, a pool could also overflow after an extended, heavy rainfall.
The consequences of an overflowing pool are minor. The only potentially serious consequence is if the pool is located directly adjacent to your home and floods the basement by way of the foundation. Moreover, if you have wood or other potentially slick surfaces around the pool, puddles could create a risk of slipping for those around the pool. Otherwise, the problem is merely an inconvenience; you'll have to add water to the pool on a regular basis. Prolonged splashing and overflowing, of course, could potentially increase your water bill if you find yourself filling the pool often. Also, if you have a soft-sided pool on your grass, the constant splashing of chlorinated water could result in dead spots on your lawn.
Depending on the pool, it's important to keep the water level high. Typically, you want the water a few inches below the top of the pool. If you find that people are splashing and causing regular overflows, it's acceptable to lower the water level an inch or two, depending on the depth of the pool. Avoid lowering the water level too much, however, as too little water can be hazardous for people diving and jumping into the pool.
Some in-ground swimming pools are equipped with overflow drains that allow the excess water to drain away rather than accumulate on your deck or patio. Other pools feature troughs that drain the water away to a low point in your yard.