First of all lets get our facts straight, TOR is not a fully instanced game
In my roaming of the boards on this site and elsewhere I have run into this piece of misinformation more than any other in numerous threads.
Instanced Areas (Story Areas)
TOR is not instanced, like Vindictus or GW1 or any other game that you are thinking of where once you leave the city the only people you see are those that are members of your party.
TOR has instanced areas, usually as part of class quests referred to as "Story areas". This is a neat quality of life feature where you don't have to fight for mobs with other players and can enjoy your character's story. Group members can come into your story area and help if they like and vice versa.
There of course are flashpoints and heroic quest group content that also use instancing technology where youre group is separated to complete the quest or the flashpoint, once again a nice quality of life feature where you don't have to fight for mobs, quest items, or compete for boss kills.
Will you see people while questing? Yes you will you will see LOTS of people running around, the instanced areas are such a small portion of the playable area that you will never have an issue not seeing or missing people.
Instanced Zones (Duplicates)
The other side to this topic is instanced or duplicated zones. This is where a particular zone or area can have several different instances(copies) that a player can be in. This technology does exist in the game and will most likely be used on starting planets during the release of the game.
Why? The starting areas are going to get hit with a massive number of new players and anyone who has played a new game on release of an expansion on release knows that it is NO FUN to have to compete with hundreds, sometimes thousands of other players for items and quest mobs. This also can cause a performance issue for players with mid to low range system.
What will happen is once a certain threshold is reached player wise in a starting area, lets say Korriban (go empire!) a second phase (or instance) of that area will open up and new player that come into that starting area will be moved to Korriban (2).
Players in Korriban (1) will not interact or see players in Korriban (2). However the ability to switch between them in order to meet up with friends and play will be an option. Dev have made it clear that they only wish to use this technology in low level heavy populate areas such as starter planets and most likely in the early days of release when populations are peaking.
This is a quality of life issue that will make release week experiences better for all who are going to play.
I hope this might clear up some questions that folks may have had and clear up some misinformation that I have come across a lot recently on boards.
Feel free to post thoughts on this topic or any questions that can legally be answered.