Why does .Net allow ambiguous methods such as these

how does the compiler know which method to call?

It follows the overload resolution rules listed in the C# language specification. In particular, in section 7.5.3.2 (looking at the C# 4 spec, but I believe C# 5 has the same numbering here) - "Better Function Member":

In case the parameter type seqquences are equivalent [...] the following tie-breaking ruls are applied, in order, to determine the better function member:

• ...
• Otherwise, if M_P is applicable in its normal form and M_Q has a params array and is applicable only in its expanded form, then M_P is better than M_Q.

So in your example, it's going to call the first overload.

Why does .Net allow this?

Because it can be useful in various cases (e.g. Console.WriteLine for a start).

I assume that in the IL, the resulting code is different and therefore allowed, but it shouldn't be, because you can get unexpected results.

You only get unexpected results if you don't expect the C# compiler to follow its specification. In that case, pretty much any behaviour can be unexpected.