»en.wikipedia.org/wiki/Burstable_ ··· _billing
Pretty simple really. See the link above for the math involved. Mainly this is used however in hosting platforms and not on ISP type connections. Mainly I think because the last mile loop is costly vs the bandwidth being used, and it's probably over the head of some people.
I would honestly like to see residential connections to match the billing of style of backbone connections. IE. You pay Telco X for a line, then pay company Y for bandwidth and a cross-connect to Telco X. This way we can switch providers whenever you want, and only have issues if we need to get a different physical connection to your building.