'Phasing Tech' was introduced in Wrath of the Lich King and allows players to observe changes in the world around them as they complete quest objectives. The system has increased the sense of immersion, letting everyone feel that their efforts in Azeroth are having a lasting impact on the game world. Currently only doodads, npc's and players are capable of 'phasing', but one of the features discussed in the Cataclysm preview panel was the concept of terrain phasing.
Perhaps the best current example of the use of the use of phasing is the Deathknight starter area, where it is used extensively to show the taking of the area around Acheus from the Scarlet Crusade as a series of quests. Presumably terrain phasing would be used to show the environmental and geographic impact of the re-emergence of Deathwing into the physical plane.
The 1-60 levelling experience and zones is set to be re-vamped, and phasing will no doublt be a big feature of the redesign given its' success in Wrath. Unfortunately this brings with it a couple of headaches: questing as a group and completing the most challenging quests where players are in different states of phase.
Phased Group Questing
If you've tried to do the 'Riders of Blood/Frost/Holy' phased quest chain in Icecrown you'll know that finding someone at the your place in the quest chain can be exceedingly difficult. If they're not at the correct phase not only can they not see the quest objectives, they also cannot even see other party members. In an ideal world you'd boost them to the correct point in the quest chain but because of phasing you can't help them out with the pre-reqs to hasten the process or overcome a difficult objective. By the same token players who have fully completed the quest chain cannot help you at any stage in the process. There's also an impact on levelling groups, due to the risk of being locked out of group activities if you did a bit of solo-questing when they were busy.
Phasing large portions of the new Azerothian terrain implies that even larger areas of the world map will have multiple phases within which the interaction of players would be difficult. In theory releasing new lvl1-60 content should make the old world seem bustling and busy, but in reality heavy phasing could make it seem like a ghost world and prevent effective grouping.
The End of the Sprawling Quest Chain
Veteran players will perhaps recall how levelling in the Barrens or Darkshore zones tended to feature more travelling time than actual time completing the quest objectives. Lower Exp/Level and mounts at level 20 have served to ameliorate the problem but levelling in these two areas remain an annoyance compared to Wrath zones. Well, all is not lost, Blizzard stated that the lvl1-60 levelling experience won't feature nearly as much travelling time. This may or may not have an altruistic motive, but it is a direct consequence of terrain phasing.
If you want to have quests a long way from your central hub you need to make allowances not only for the objectives' phase state, but also the phase state of the NPC's around the area and now the terrain as well, which is much harder to compensate for. For example, we know that in Cataclysm a shoreline (presumed to be in Darkshore) will be eroded over the course of a phased quest chain, and this prevents any objectives from being present in the eroded coastline unless intimately linked with the chain that phases the terrain. Currently the occurances of this sort of conflict are rare, I can only think of The Hunter and the Prince when Battle Before the Citadel is in your quest log, but the conflict is set to become commonplace.
Inherently, phasing makes multi-zone quest chains harder to design, which is great for levelling but not so much for epic end-game quest chains sprawling across the game world.
There are a few ways to approach the dealing witht he problem. The easiest by far is the status quo: a great deal of the quest chains are solo content with the harder objectives consigned to instances (which can then be grouped as usual) or not not be phased at all. This means that although out-of-instance groups can be difficult to form the completion of tougher objectives can be done with the aid of an instance group, but it should probably be veered away from if you want to encourage the levelling of alts. Sons of Hodir and the pre-'Rider' Shadow Vault quest lines are a good example of this.
The second, and perhaps more difficult to implement, would be a 'Join Phase' option in a party. In principle a player could be allowed to aid members of a group in a different phase of a quest chain, and the only way to do this would be to temporarily duplicate their phase information. Once the selected player has 'caught up' to a party member that member would then to continue to progress along the quest chain as normal. Obviously this is not a trivial change, but is quite handy because not only is it useful for completing those tough elite world quests, it also makes grouping up socially for a zone to work through some quests collaboratively a cinch. Small levelling groups wouldn't have to worry too much about a member having completed the odd quest or zone on their own and being locked out of participation in the group for long periods of time.
There is the 'Starship Pegasus' risk upon changing terrain phase states, but this could be avoided by the use of safe locations for phase changes (non-phasing towns or any zone terrain which stays unchanged).
Summary - Cool has it's Consequences
I really like the phase style of quests seen in Wrath. It's a great addition to the game and finally makes it feel like your having an impact in the game world without that world having to be instanced. The risk of a world that appears dead even with hundreds of players in the zone will always be the danger of phasing, perhaps leading to the realisation that the tech should be used sparingly and more intelligently than it currently is. However the quests are designed, the ability for party members to link their phase state info should be included if you want to encourage 1-60 levelling.