If I have booked a seat and it is occupied, if there is another unreserved free seat as good or better then I will not ask the person to move, but if there isn't then I will politely ask them to move, ignoring all excuses and getting train staff to enforce it if necessary. If I find a better seat that is unreserved and decide to sit there, I will remove the card from the back of my reserved seat after checking that nobody else has reserved the seat for a later leg of the journey.
If I have not booked a seat and can't find an unreserved one, I will sit in a reserved seat. I will firstly look for seats where the passenger has not turned up, secondly for a seat where the reservation doesn't start for a long way into the journey and finally just sit anywhere. Seat reservations are given automatically when booking, even if the passenger has a ticket that allows them to take an earlier or later train - which they often do. There are always plenty of reserved seats that are not taken up. If the passenger with the correct reservation turns up I will move.
On many continental railways the reservation only lasts for 15 minutes from the point of departure, but the position is unclear in Britain. I don't think it is right to kick someone out of your reserved seat 2 hours into a long distance journey after spending that 2 hours in a different seat.
The most annoying practice is Cross Country trains and their electronic reservation displays, which allow seats to be reserved after a train has started its journey. You can sit in an unreserved seat in Newcastle, only to find when you reach Leeds that the seat is now reserved from Leeds to Bristol, and you have to move. I have heard that the only way to prevent this is to tell train staff to reserve your seat on the spot when they come down the train, but I haven't tried this yet.