The computational load in a game scales with the number of Entities. The more NPC's and players, the more the servers have to do.
Load balancing is a good thing because having idle hosts is a waste of money. You'd rather not have bought the hardware, and paying for power, A/C, and maintenance on an unused host is pointless. Ideally, you would have the same (full) load on each host.
Consequently, load balancing is all about mapping Entities to hosts. Dynamic load balancing is about migrating Entities to new hosts.
Many MMOs use the naive approach of decomposing their world into chunks/zones, and then mapping those to different server hosts to provide some load balancing. Smarter ones break the world into many more pieces than there are hosts, and rely on probabilities to provide some kind of load distribution. Really smart ones dynamically decompose and coalesce pieces of geometry as they fill up and empty out.
However, these systems will still face the "flash crowd" problem. "Hey, dudes, there's a blue dragon downtown! Let's go see Thresh get thrashed!". And suddenly 500 players are standing within 100m of each other. Even the dynamically adjusted systems have a lower limit on the useful decomposition of geometry. If you slice down to 10m pieces, you will still be interacting with all the pieces within 100m and all the hosts running them.
It would be better to load balance based on load. Distribute the Entities evenly among all available hosts. The challenge with this approach is how do you interact with Entities that are nearby in the game world if they are running off on some random host? More on that...