A massive number of players can play online and it's a game.
A massive number of players can not be in one section of space at a time, not together, the system shards people into twitch manageable islands.
The persistent online universe is the same for everyone, cause and effect of player actions is experienced by all online players.
If say for example an important combat bond mission appears with a fight between Fed and Imp capital ships. There might be 10, 20, 100 or more islands all playing the same scenario with 32 players a piece.
The proposal is that the results of those efforts are aggregated into the same result for all the shards/islands. So if the net result is that the Fed capital ship get's taken out, that's what everyone will see.
Who you get matched with in an island is based on friends lists, ignore lists and other interesting stuff.