Massively multiplayer games such as Guild Wars 2, World of Warcraft, and Tera all have one thing that they universally need to be able to handle: massive amounts of players. That is the entire point of being massively multiplayer, after all. Different games handle it different ways, in many ways dependent on the specific requirements of the systems in-game.
EVE Online handles it through time dilation, literally slowing down the game to let the servers keep up with thousands of players at once in the same system. Many games pointedly limit the number of players in a given PvP arena. Guild Wars 2’s world vs world PvP has handled it with culling, where only a certain number of other players actually show on a given player’s screen.
Culling has a few very obvious problems with it, most obviously the ability to be killed by abilities and enemies that you never get a chance to see. Usually the system updates quickly enough to keep you seeing the closest enemies, but it isn’t foolproof and has its bugs. Stealth, for example, because of the way it works can end up lasting a good couple seconds longer in effect simply due to the character not rendering immediately on breaking stealth.
Arenanet has announced that they are bringing an end to the culling mechanic as part of the March 26th patch. Doing so has been stated as a goal in the past, but actually making it happen has proven more difficult for obvious reasons.
The solutions for Guild Wars 2 are far preferable to not being able to see enemies. Characters will render in three different ways. Some will register with the high resolution models that are familiar to anyone who plays the game as the regular character models. Once a limit has been reached on high-resolution characters, more will be displayed using low-res models that are more generic, showing little more than general race and armor class. If still more people arrive to hit a cap on low-res characters, players will be further displayed only as nameplates.
With this change players of Guild Wars 2 will get two new customization options to let them further fine-tune this system, allowing them to select how many characters to render as models instead of nameplates and how many to use the higher resolution models for.