It's their version of time dilation - while for you as the player in front of the PC everything works normally, everything inside the star system in question goes slower the more people pile up.

In extreme cases (2000+ players) it means that for every ingame second, ten realtime seconds pass. This slowdown would happen anyway (at least until the server crashed), so this way they get to control the whole thing and can recover from such fringe events.

This solution wouldn't be usable for FFXIV, however, and adding additional calculation capacities to a server cluster pretty much has to be designed into the code right from the start. If your software isn't scalable, you're pretty much out of luck when demand exceeds capacity.