...fewer people waiting at bus stops (because less time has elapsed since the late bus passed).  Ultimately, the bus in the rear catches up to the bus ahead of it. However, it can be difficult for the rear bus to pass the one ahead of it, because it also has to stop at all the bus stops to drop off passengers.

For people waiting at bus stops, this leads to huge gaps in bus arrivals. If a bus is schedule every 10 minutes, its common that two buses will come every 20 minutes and that the front bus will be too crowded to board and the rear bus has many empty seats. Having streets with multiple bus routes makes the problem worse. 

This bunching problem has pretty much capped ridership on TheBus system at about 70 million rides per year since the early 1980's. It's not that the City can't add more buses, its just that every bus it adds makes the bunching problem worse, leading to slower average travel speeds, and higher per rider costs as the ratio of bus drivers to passengers decreases.