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Soft grouping allows everyone involved in a fight full experience and full loot, regardless of whether they are actually grouped together. This is necessary due to the chaos of large-scale 3D combat. No one owns a mob in a dogfight.
"Basically, the way it works right now is if you and I are both fighting this thing we both get full credit for it and that means loot and experience. It's what I call soft grouping." -- Hermann Peterscheck