"Simpler, but no simpler" --Einstein
When you grossly oversimplify a matter, you are violating the "no simpler" part of the above quote from Einstein.
Something should be simplified, but not simplified so much that it is too simple.
Examples of oversimplifying:
Programmer says: hey, we don't need a boolean in our programming language, we can just use 0 or 1 instead
True you could use 0 or 1 to emulate a boolean, but using 0 or 1 is too simple
True you could just get away with using a keyboard and no mouse, but mice have been proven to be extremely useful despite adding a slight bit more complexity to our computing experience.
True you could just use a command line, but a GUI, although more complex, offers more power, not less. You can even use a console within your GUI, at least doubling your power.
Programmer says: let's just use xml we don't need a database for our banking system
No, you are probably going to need something a bit more sophisticated than simple XML for a banking system, sorry.
Creationist says: god created the world, the bible is the only absolute truth
Well, we evolved, and it isn't that simple.
See also: AntiPattern, EinsteinPrinciple, SimplySimplistic, OverSimplification