Unbalanced encounters is one of the staples of the OSR/old school modules. However, most of them have some kind of recommendation regarding PC levels and/or numbers. For example, this extensive list of OSR adventures has a dedicated column for recommended character levels.
If the modules are not supposed to be balanced anyway, what the recommended levels are for?
OSR doesn't attempt any kind of rigorous balancing, such as WOTC has tried with CRs and ELs and so on, and it gleefully throws in an occasional fight which is much tougher or much easier than is average for the area, such as the original B2 Keep on the Borderlands, where the Caves of Chaos mostly house kobolds, goblins, and orcs (all 1 HD or less), but there are also an owlbear (5 HD), ogre (4+1 HD), and minotaur (6 HD) lurking about to give unpleasant surprises to a careless party.
However, there is still a more general sense of roughly how difficult things are, which is where these level range recommendations come in. They allow you to match things up so that your PCs will usually be able to handle most of the content in the module (or maybe all of it, if they're at the high end of the level range), because even old-schoolers don't find much fun in sending first-level PCs up against Tiamat, or pitting a half-dozen 12th level characters against three goblins.
"Balance" is a nebulous term, somewhat meaningless for OSR style adventures. Modern D&D (at least 3e and 4e, perhaps someone else can speak to 5e if it differs significantly) expects PCs to kick down doors and fight everything that's inside. There are tables for calculating resonable fight difficulties, and advice on how many of those PCs can handle per adventuring day. An encounter slightly below their level, a couple of encounters of their level, and an encounter of higher level will in theory sufficiently drain the PCs' resources so they can feel heroic without killing them outright.
In OSR, however, PCs are expected to do their best to avoid a fair fight. Combat tends to be short and swingy, and a party that tries to simply fight everything it comes across will quickly meet its demise. So what do recommended levels mean in an OSR adventure?
While PCs shouldn't fight everyone they meet, some fights will still happen. Maybe they get unlucky and have a random encounter they can't avoid, maybe their attempt at sneaking or lying their way past fails. Other times, PCs can weaken the enemy somehow, e.g. divert some of their forces elsewhere, but can't entirely avoid them. They fight dirty, but they still fight. Finally, some fights may be unavoidable, like a "boss fight" if the PCs actually want to beat the adventure.
The recommended level, then, is the level at which the PCs can reasonably handle stumbling face first into at least some of the enemies in the adventure, but can't expect to beat them all, either. High level parties would be bored with skeletons and goblins, low level parties wouldn't be able to handle demons no matter how cunning they are. Note that OSR adventures often include particularly dangerous enemies as well, that are usually signalled as something to avoid. There, all bets are off.
Another consideration is the amount of treasure PCs can possibly find, as this often scales with their level.
