Here's the note in PhabricatorPeopleQuery about this:

// NOTE: This doesn't handle overlapping events with the greatest
// possible care. In theory, if you're attenting multiple events
// simultaneously we should accommodate that. However, it's complex
// to compute, rare, and probably not confusing most of the time.

rare

Maybe my calendar setup isn't common but I usually have multiple overlapping meetings each week - I know others at the same company manage their calendar in a similar fashion.

1. The most common reason is because I will be invited to a meeting from someone outside the company/organization, but at the same time I need to reserve a meeting room and other people's time within the company who would need to attend but didn't receive direct invites from the outsider. For me this results in being scheduled for two separate events for the same time.
2. Another situation where this happens for me is when there are day-long events that I will usually need to participate in and keep my time reserved, but already have meetings scheduled for those days.
3. Other occurrences are usually because someone schedules over my existing recurring meetings and I get to choose which to attend~

I believe we only get it wrong in the very specific case where you're attending a "Busy" event and an "Away" event at the same time. We'll show the dot color for whichever event started first, so if the "Busy" event started before the "Away" event you get an orange dot instead of a red dot (if the "Away" event started first, we show a red dot, but that's the right color to show).