Is it correct to say that even if a hair falls out, the follicle that the hair was contained in is still in your scalp? If so, doesn't it mean that when you get a HT, you are placing follicles on top of another follicle? I may be wrong, but I'm just curious. How does this all work?

You only place FU where you are bald, and a FU transplant from your donor (back of head) containts the hair/shaft/and follicles which is transplanted into the bald area. No the new follicle is not placed on top of the old follicle.

If you believe that "follicles never die" then technically yes, you are putting a graft into areas where dormant follicles are slumbering. You could very well be infringing on old follicles when you put new grafts in.

A lot of guys don't care because they figure that those older follicles are useless, as far as they are concerned.

I'm not sure if this is an issue. If you are asking because you're interested in HM, there should be plenty of old follicles that get "missed" by the new grafts. Hair transplants don't generally recreate your original density, there is not enough of a donor supply to do that.