Well, for the sake of the example, a few things about New Cap City need to be explained:
1. There is no latency. It's fully immersive virtual reality that has no lag.
2. There is some hacking. Some players have illegal hacks that can temporarily give their avatars superhuman speed, but they have significant neurological side effects on the player (since the game works by interfacing with the brain, it involves tampering with neurochemistry as part of the hack). It's also been shown that it's possible (albeit difficult) to appear using a copy of someone elses avatar. There is no known hack that can get a person back in to New Cap City after being killed, however.
3. There is no apparent plot or goal, it's a huge "sandbox" world where people seem to spend most of their time going to incredibly seedy nightclubs, cabarets, and dance parties (when they aren't in shootouts in the streets). [sblock]A couple of invincible teenage girls with apparently godlike powers within the virtual world, dubbed the "Avenging Angels" by the players, appears later on provides what seems to be plot to the player base, but it's definitely not a scheduled game event.[/sblock]
4. As was pointed out, if you have even a split second to do so, you can log out of the game and disappear. You die if your wounds would be instantly fatal, but if you know death is imminent you can just log out. Lots of people log out at the first sign of real trouble, like a shootout being imminent. Many players don't appear to be in New Cap City to fight, they seem to want to have a way to visit dives and "dangerous" bars and the "criminal underworld" in a virtual-reality way, and with a sense of danger but no real danger.
Now, that aside, the virtual world in Caprica has places other than New Cap City, that's just one of the more popular games.
Virtual-reality brothels, raves, gladiatorial matches and such are very popular (especially with teenagers, in the pilot we see what seems to be an incredibly depraved party filled with teenagers that goes from bloodsport to human sacrifice. . .until the big reveal that it is all in virtual reality).