Greg Tito said:
Ryan Dancey from Goblinworks is busy creating what he calls a sandbox fantasy MMO.
Good luck. That takes a lot of time and effort and coding, from what I can tell.
Perhaps when they say sandbox they don't mean dynamic. After all, MMOs in their very nature are already open-world sandboxes (you can go where you want, when you want, and do a bunch of different fun stuff). But if you want to make something that isn't a themepark of set piece adventures, you have to make it dynamic, and to make it dynamic you need to simulate a dynamic world and offer players a ton of tools to influence said dynamics.
Consider for a moment what would go into something like that:
1. First, you might want to generate terrain dynamically. That means hills and valleys as well as climate. That way each server can feel like it's own experience but also look and feel like an authentic planet. That generally involves research into geology and the construction of a simulated planet (or planet subsection; consider basing the server on an island where local water currents make conventional boat travel "seemingly impossible", until such time as you want to expand the size of the server in which case you can introduce the discovery of a magical portal or a hitherto unknown sailing technique or path or whatever you want).
2. Second, you may want to introduce harvestable resources such as forests, minerals, and wild fruit/vegetables if player-initiated crafting is central. You may also want to generate and simulate soil quality if agriculture will occur. You'll also have to simulate such features growing and replenishing over time. For minerals, you'll consider both the quantity of minerals as well as how far below the surface they are. Even if player-initiated crafting is not a design goal, you'll still want estimates if you want to simulate NPCs properly.
3. Third, you'll need to populate the world with animals and monsters. You can simplify this by creating "communities" (large groups of a particular species operating under one ruleset) and spreading them around the map. Each community of animals/monsters should have values for population and the amount of area they're spread around, rules for generating their combat stats if encountered (and meta rules for defining the rules of a randomly generated community), and rules for determining how they grow over time, how much they tend to migrate (and for what reasons: i.e. a community of goblins might migrate in response to PCs hunting them, or migrate towards small impoverished settlements to start ransacking them), and so on. You'll also need to simulate these communities reacting to each others presence and proximity; for example, an Orc settlement would likely not be very close to a Goblin settlement without a good reason (say for example, in your world Orcs and Goblins like to work together, or Orcs tend to enslave Goblins, or Orcs and Goblins aren't necessarily evil or hostile to others and would be more like NPCs), whereas communities of Rabbits would tend to be everywhere regardless of proximity since they reproduce so quickly and consistently flee from danger.
4. Fourth, you'll need to populate the world with NPCs. Like monster settlements, they'll need rules determining where settlements are likely to occur and for what reasons (proximity to a water source or other resources, proximity to nearby settlements, access to trade and travel routes, etc.). You'll want to simulate the migration of NPCs to a particular area, the construction of settlements, and the sorts of shops and trades that spring up. You might also want to simulate the strength of the NPCs (down to which NPCs are which classes or work which trades at what experience level) to measure their ability to handle small scale raids by monsters to armed incursions from PCs and large scale invasions in the case of nation-simulation.
5. You'll need to simulate and generate how NPCs influence PCs. Whether it be a local farmer begging a PC to exterminate a local pack of wolves attacking his cattle, or the city watch cracking down on crime by outlawing weapons in city districts in response to an increase in murder rates (whether said murder rates be a result from NPC simulation or PC action), or the collapse of a mine two towns over making weapons harder to come by, or the sudden presence and incursion of a dragon scaring travelers and traders off the roads. Even more important, once you've simulated these reactions you need ways to communicate this information to PCs dynamically so that they can come in and be adventurers like they're supposed to.
6. You'll also need to create systems to handle how PCs influence the world around them. If a bunch of PCs start a guild and start a town, it's natural for NPCs to move in and take advantage of the protection. And then what about taxes, and making laws, and hiring a city watch, and constructing a city hall or whatever? What about a contract system that allows PCs to make agreements with each other or other NPCs? Can you (and do you even want to) create a system that allows for PCs to raise armies realistically, from supplying your army with food to simulating morale? There are so many possibilities here and it can be as complex as you like. The more realistic you make it, the more possibilities you offer your players and the more dynamic the game becomes as a result.
7. To shake things up a bit it's important to generate "leaders" who will cause animals, monsters and NPCs to act differently. Perhaps an alpha-wolf causes a community of wolves to get more aggressive, or an evil necromancer appears and raises an army of undead via the local cemetery, or an Orc chieftain unites several bands of Orcs under one banner and assaults a village, or somebody takes out the local crime kingpin or leader of the thieves guild and takes over the underworld. You might also want to include a handful of cool "set pieces" regardless: hidden portals to the underworld buried deep in the far corners of the earth, menacing dragons atop the highest mountains, and so on. Where NPCs are least likely to want to be is where the cool stuff should happen, so you can even generate these kinds of things systematically if you wish.
There's more where that came from but I'm sure you all understand what I'm getting at by now so I'll stop there.