When the sensor (SSM or any other sensor) is oversubscribed and the sensor is monitoring Inline, then a portion of the traffic will be Dropped.
The traffic will not be allowed through if it has not been inspected.
The "fail-open", "fail-close", and "bypass" are not relevant when talking about over subscription.
The only time the "fail-open", "fail-close", or "bypass" configurations comes into play is if the sensor can not do ANY analysis (either a failure, or an upgrade in progress).