Wuldor pretty much nailed it for you willy. My understanding is that all PvP is consensual, to a point. A dialog will come up, allowing you to accept or decline any attack, but declining will require a payment of tribute to the attacker. The payment will essentially scale with how difficult it would be to fend off that attack: A challenging opponent will require less tribute to pay off, while I weaker one will require more. This is basically an anti-harassment method, as players who vastly outgun you will not really gain anything from your declining to fight, and thus will have no incentive to repeatedly challenge weaker players.
Merku, based on how I understand the game to work, there's really no reason to prune the game of inactive cities as you're suggesting--there isn't a limited amount of land that everyone's vying for and if someone wasn't online, you'd really never know they were there at all. For all intents and purposes, a players' kingdom does not exist (to other players) unless you already know that it's there--we don't share borders on a giant grid like some games approach it. Instead, we all see a World Map on which only NPC cities and our own city (and perhaps the city of each friend and guildmate) is represented, and unless we specifically look for a player's city or engage in random matchmaking, we won't know someone else is there until we attack them. This keeps the map from becoming completely filled with player cities to the point that you can't even see it anymore.
If you look at screenshots of the current World Map, you'll see that displaying every player's city really just isn't a feasible goal for DoF, or any game that I can think of.
TriggerHappyNDB :: "O happy bullet! This is thy chambre... There combust, and let me die."