The use of a technique referred to as "instancing," where a portion of the game world is created on demand for a group of players, is nothing particularly new. In effect, two or more groups of players can be working their way through identical areas, but each is in a private instance of that area, so the separate groups will not see, or interfere, with each other. Anarchy Online was among the first to instance certain content, and a lot of major MMORPGs, including EverQuest and Final Fantasy XI, employ similar systems to different degrees.
Guild Wars takes instancing to the next level by instancing everything. There are obvious benefits to this. With a relatively small number of players in each zone, you don't get the huge lag spikes so common in most massively multiplayer games, especially when you enter a densely populated area. It alleviates line-ups for the opportunity to vanquish a certain monster requisite to a certain quest because someone got there before you. It also makes it to possible to have arena-like matches between consenting groups without interruption from the uninvited masses. The greatest appeal of instancing, however, is that it allows for the linear and epic style of adventures common in single-player RPGs, while still within a large online community of persistent characters.
Of course, there are disadvantages to instancing as well, so I expected at least some parts of the Guild Wars world to be "persistent." To my surprise, even the towns, which serve as meeting places and trading posts, exist in multiple incarnations of themselves. Such it is that you and your friends may be standing on the same spot in the same town and not see each other! It's easy to switch from one mirror of the town to another by selecting the "district" number you want from a drop-down menu, but it is not what most of us have grown accustomed to. More to the point, the sense of being in a universe inhabited by hundreds of other players is definitely diminished, despite the fact that there are no separate "servers" or "shards."
While a single city zone can clearly handle quite a few people, quests, PvP arenas, and even explorable areas seem oriented toward small groups of less than 20 players. Guild Wars is arguably not a massively multiplayer game. Nowhere is this more noticeable than when you're exploring a wilderness area and your party never comes across any other players.