Today's content update included a major change to looting, and since I'm sure there's some interest in this, here's how it now works.

When a creature is killed, everyone that is in range of them gets an independent chance to get an item (if they are allowed to drop items). This means if you are in a party of 5, effectively 5 times as much loot is dropping per kill, and you are not competing with the rest of your party for loot. Bosses generally have a 100% chance to drop items, so everyone in the party should get something from a boss.

When an item does drop for you, what you get is based on the relative rarity/quality of the items which that creature can drop, which means you're far more likely to get a common item than an epic item from trash mobs, and more likely to get a rare item than a legendary item from a boss.