The lobby server says, "Hold a moment, please! I can only send out so many requests without errors!" and sets you up with a lobby session and queue number. At the top of each minute, it checks for vacancies in worlds, then starts processing through as many people out of the queues as it can, limited both by space in each world and order that you contacted the lobby server. If both conditions are good--there's space on your world, and your turn has come up in the lobby--then it's load screen city for you!
Anyway, no doubt that I could be misinterpreting the description of how they have their system set up, but I believe that is roughly how it works.
ETA: I am amused by the fact that I had to work around a typed character restriction to discuss character log in restrictions, and I find that I must say so. :D
