I logged in for the first time, walked around some small town and didnt see anyone who I thought might be a human player, then was killed by an elf in an alley. I kinda felt like I had nothing to do, and nothing is really drawing me back in. How many people actually play this? Seemed pretty empty to me.
Oh, yeah, you should probably make a character in either Allanak or Tuluk. All the other cities do have their fun moments, but those two are where all the action happens. Labyrinth is basically a free for all PK zone (with a lot of interesting RP around surviving that). Luir's is a trading city, but you'll rarely see traders because of the outdoor hazards. Red Storm is just really hardcore. You'll rarely find people there, often freaks and spice (drug) dealers.
Seeing how you just got randomly ganked by an elf in an alley, I'm guessing you either went to Labyrinth or Red Storm. Random killing is shunned upon in Arm... the threat of death or murder is often very real, but most people use it as a last resort out of OOC sympathy. It varies though.. but even if you do get randomly attacked by a player in the 'rinth, they'll usually avoid a killing blow if possible and just take all your stuff.
If you want to interact with people, sit around in the main taverns. They'll usually be able to identify a newbie from your boots