If you want the technical details, read The Continuous World of Dungeon Siege (a fascinating read).
To avoid floating-point problems and to allow continuous loading, the world was split up into nodes with specified transformations between them. This resulted in a world that often cannot be mapped, as it would pass through itself. There were also many tricks that were used to fit the huge number of objects in memory. Many things self-destruct, or disappear if out of sight for more that a few minutes.
You can observe a lot just by watching. -- Yogi Berra