Ok, so I'm beyond excited to play this game, but I'm confused as to how interaction with other players is going to work. Could someone explain to me how all of this is going to work? I understand the idea of the megaserver, but how will interaction work outside of Cyrodiil? Will I be able to see other people playing in the PvE areas or just in the PvP area. Will there be player interaction inside cities, such as a trade chat or auction house, and will I see any other players inside the cities?

you will see other players everywhere

You will always see people while in the game world. The only time you won't see anyone is when you are doing the main story line since it's completely solo.

So the main story line is somewhat instances, but other than that everything else allows interaction with other players?

Yes the main story is completely instanced but everything else isn't (except for instanced dungeons and adventure zones). But you will always see people when you play the game.

Awesome, thanks for clearing that up for me!

Adventure Zones (endgame PvE content) are actually open world environments and are not instanced like traditional raids in most MMORPGs. Outside of the main storyline and heroic/master dungeons, most of the game will be relatively open based on your preferences. Cyrodiil obviously will be the most open aspect of ESO at this point.

Adventure Zones are "open," but they are still very much instanced. You aren't going to see two thousand people. Cyrodiil is still instanced, even though it's an opened zone. You have to go through an "instance" to get into Cyrodiil. You can't just walk into it.

and hopefully it will be done in such a way where it doesn't feel like an instance at all, just a bustling pvp zone... fingers crossed!

Well it should with 2000 people in there.

I wonder if Adventure Zones will be housing lots of groups doing seperate areas in there at once? Maybe you will be able to go in alone and find a group to join up with as you explore, i think that would make the best overall MMO experience in the end game PVE