I believe wow (and most MMO's) instead take input from each player and run the simulation completely on the server. Although often enemy and NPC positions aren't synchronized exactly between players. There's also much more tolerance for latency in crowded situations - it doesn't really matter if the ~30 other player characters lag behind their actual position in a town by even 5 or 10 seconds, you only need players in your party or who are fighting against you to be low latency.