The instance population is one factor, but it's not the only reason.

The timers also used to add difficulty to the dungeons. Back in the early phases of Beta, Tam Tara Deepcroft was a much longer dungeon. About twice as long as it is today. And the Timer was only 60 minutes, not the 90 or 120 it is today.

This created a condition for failure, and honestly I loved it. Dungeons are NOT very difficult, not the trash, not the bosses. But having to fight your way through it and beat that final boss within a limited time frame? That made it challenging. Really good teams could clear it in 30 minutes, but I often finished it at very close to 60 minutes because my group either wasn't that good, or we tried to get a lot of side chests.

Think of Toto Rak. Ever noticed how long it is with a bunch of side rooms you can skip? Well, imagine what it was like in beta. In beta the chests in those side areas had some nice pink items in them... But going to get those chests took time. Do you try to get those side chests, or do you pass it up to save time?

The dungeon timer also meant that the group kept moving. People didn't get to join a dungeon then go AFK for 10 minutes.

This is something I feel this game really lost at launch. Back in beta, I honestly listed the dungeon timer as one of my favorite features of this game. I loved having a condition for failure in dungeons, rather than doing it the way other games do, and let players just try again and again until they give up.