Ravn, I can give a short explanation, as there are 4 things in play with how servers can act, and that can get a little confusing.
Sharding: When a zone gets too busy, such as the starting zone of a new expansion at launch, a server can split the players in that zone, over two or more different versions of the zone. This is done to prevent it from getting too busy and laggy, and may result in you not seeing another player on your server, in the same place as you, because they are in a different shard. Blizzard tries to minimize this on RP servers.
Cross-Realm Functionality: These days, it is possible to play with friends from other realms. If I make a group with a player on the Turalyon server, they are transported to my server. It’s why you may sometimes see players from completely different realms on your own server.
Cross-Realm Zone: WoW is supposed to be a social game, but some realms are so small, or have zones so empty, that Blizzard activates CRZ to merge the zone of different realms together. It is why on this server, it is pretty common to see players from Earthen Ring/Darkmoon Faire or Argent Dawn. Not many people like CRZ, because the people you see remain separate. You cannot add them to your friend’s list or guild. Some RP addons don’t work cross-realm. You can’t trade with them. So mainly they are just competition for mobs and resources. Only Orgrimmar and Stormwind are immune to being Cross-Realm Zoned.
Connected Servers: Connected servers effectively merge servers into a permanent bigger combined realm, with all the benefits that come with it. Players from realms connected to you may trade, become friends and guildmates and all that good stuff. For realms that already Cross-Realm Zone together, this is a superior solution, as they would also gain the benefit of shared community.
The main problem with RP on a small realm is that lack of players means a lack of publicly available RP. If there are not enough players to encounter out in the world, roleplayers turn to guilds for all of their roleplay. This is what’s happened currently. There’s guilds around, but they are largely focused on their own roleplay adventures, not standing around in public, for other roleplayers to encounter. More connected servers would grow the community, and bring about positive change in that area. Especially if they do end up merging all the non-AD RP realms together.