I think it's a seed based generator, so when generating a new world, it'll get a seed and use that - but then any time you change a block, like dig or place a block it has to save that block - but only the changes because the world can be re-generated at any time.
So, as you approach an area you've never been in, it might have to generate it from the seed. It's the only way that a game like that can exist, if you consider just how much memory it would take to keep the whole world in memory. Aparantly the generated world is bigger than earth, scale wise - well that probably means you could walk in one direction for days and days without any problems. I took a boat out before, sailed for ages in one direction, found an awesome dungeon, died, and will never find it again
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It's a shame tho that griefers are so damn common in this game, what I would like to see is server admin control - like when you start, you aren't allowed to destroy or build, just run around an explore - then the admin has to allow you to build. Might allow for different types of game, like hide and seek, tag, treasure hunts, pac man! etc etc. So much scope in Minecraft, and survival mode is awesome - should make Notch even richer once that's in place if you consider people with no login of their own, who will need one.
Health, Ammo, and bacon and eggs!
