Loot can only go to one person. For consumables, such as potions, a random person is given the loot, whereas (usually)equipment has a tiered lottery system, based on whether your the gear is meant for your class or not. If it is meant for your class, you can need on it. If it is not, you can greed on it, if you want it. If you don't want it, you can pass on it. Everybody can greed or pass on an item.

Once everybody has chosen to need/greed/pass, the lottery begins. If anybody has needed on it, the equipment is randomly awarded to one of the characters who needs it. If nobody needed on it, it is then awarded to a random person who greeded on it. If nobody has greeded on the item, either everybody has passed or the timer has run out, and the item returns to the aether.

I mentioned that this system is usually for equipment. There are certain crafting materials that also use the need/greed/pass system, but everybody can need on a crafting material, since nobody can enter a dungeon as a crafter.