The word you want to look for is "interest management."
In general, the server will limit how many entities you can see, and will often send less detailed information (longer time between ticks; coarser coordinates, etc) for entities that are "less interesting."
The interest management algorithm for most MMOs typically looks something like:
- if it's my character, or someone in my group, or someone I have targeted or is targeting me, interest is "full"
- if it's someone targeted by or targeting some group member, interest is "high"
- allocate interest on a declining scale based on distance to player (further away is less interesting) until the pipe gets full
This assumes that you can make a good estimation of how much bandwidth is used by each entity, and that you can set a reasonable bandwidth limit that will not overwhelm the player.