http://en.wikipedia.org/wiki/Instance_dungeon

In MMORPGs, an instance dungeon is a special area, typically a dungeon, that generates a new copy, or instance, of the dungeon map for each group that enters the area. This saves server work and ensures that there will never be competition (kill stealing, spawn camping) over resources such as mobs within the instance and that player characters experience minimum lag.

This also preserves the gaming experience, since some gaming scenarios do not work if the player is continually surrounded by other players, as in a multiplayer setting. Instance dungeons may contain stronger than usual mobs and rare, sought-after equipment. They also may include level restrictions and/or restrict the number of players allowed in each instance to balance gameplay.