Instead of reading about a Dragon attack, we'll witness stuff "exploding in giant balls of fire," villagers screaming and guards trying to recruit heroes.
"...our event system won't make you read a huge quest description to find out what's going on," said Guild Wars 2 Lead Content Designer Colin Johanson, on the official MMO website. "You'll experience it by seeing and hearing things in the world."
"If a dragon is attacking, you won't read three paragraphs telling you about it, you'll see buildings exploding in giant balls of fire, and hear characters in the game world screaming about a dragon attack."
"You'll hear guards from nearby cities trying to recruit players to go help fight the dragon, and see huge clouds of smoke in the distance, rising from the village under siege."
ArenaNet also tackle the quest givers themselves, turning them from 'dirty liars' into real victims if you don't do what they ask of you...
"There is a second fundamental flaw to traditional quest systems: what the quest text tells you is happening in a quest is not actually what is happening in the world."
"... in a traditional MMO, the character who gives you a quest will tell you ogres are coming to destroy the character's home, and you need to kill them," continued Johanson. "You then get a quest which says, "Kill 0/10 ogres" and you proceed to kill a bunch of ogres standing around in a field picking daisies." Doing nothing equals consequences.
"Since every player in the game needs to be able to do this quest, the ogres will never actually threaten the character's home - they will just eternally pick daisies in the field. The ogres aren't actually doing what the quest says they are - the game is lying to you!"
"At ArenaNet, we believe this is NOT good enough. In Guild Wars 2, if a character tells you ogres are coming to destroy a house, they will really come and smash down the house if you don't stop them!"
There's loads more in their Dynamic Events Overview piece. Guild Wars 2 releases on PC sometime in 2011, with beta expected this year.