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The term Megaserver refers to the type of server implementation used in The Elder Scrolls Online.

This differs from most current massively multiplayer games, which typically use separate servers referred to as "shards," in that every player is connected to the same logical server.[1][2] This means that there is no need to switch to a different server in order to avoid lag or connect with friends. However, it isn't possible for every single player to co-exist within the same game space. Because of this, the megaserver utilizes phasing in order to group players with friends and like-minded gamers.

Technically the megaserver is not one single physical server, but rather a network of servers combined into a single logical unit. 

References

  1. October 22, 2012. MMOAttack Elder Scrolls Online Hands On Preview
  2. October, 2012. Tamriel Foundry Developer Interview: Matt Firor and Paul Sage