Because many people seem to have forgotten how spawns worked back in the days, I'll try to explain it as clearly as possible. There are a few major differences between real Tibia system (which we're using) and OTS.
In real Tibia spawns were actually called "homes". Each home had [x, y, z] coordinates (one unique square), race (monster type), amount of monsters, and regen (base for respawn).
Placing monsters on the map
Here comes the first difference. In OTS each monster has its own square, whilst in Tibia more monsters could be assigned to just one square (one home, basicly). In that case - when the home square is already occupied, next monsters look for a free square around, counter-clockwise like so (square '1' is home):
That's why you'll experience monster 'form' dense groups.
Respawn time (little customization)
For each home there was also only one timer, means monsters of the same home didn't spawn independently (all at once, like in OTS) but one after the other. Therefore it may often take way longer for a full resp, but... not necessairly. There are two other important factors to take into account. Firstly, it all depends on regen, which for many homes was set low enough, and secondly the real respawn time was dependant on players online and partly randomized. Let's use regen = 600 (10 mins) as an example here: with no players online it then takes between 5 and 10 mins to respawn (7.5 on average) - that's the longest possible. The more players online, the faster it gets, reaching the shortest time at 800 online, in that example it results in respawn taking only 2-4 mins (3 on average).
That was the original, it's now worth to note we've applied a little tweak in this formula. Taking into consideration that players today tend to spend their ingame time way more effectively than back in the days, plus the fact that we're going to hunt all MCs (making it impossible to reach very high online numbers), we've come to a conclusion that respawn time may seem to be slower than it was in real Tibia with similar server's activity. To balance that out we've "moved" the whole formula down by 200 players. In simple words: 100 players in Tibiantis will result in the same respawn as 300 players in real Tibia, and 600 players in Tibiantis will equal 800 Tibia players (fastest spawn).
As for regen value, it may vary between homes, 600 appears the most often, but many homes have lower values, e.g. rats under Al'Dee have 200-300, resulting in much faster spawn there. On the other hands, certain monsters have very long spawns (e.g. monks in IotK monastery).
Blocking respawn
It's true that you can block respawn from another floor. If you played in the old times, you should remember how people always used to wait for single demon spawn more to the west.
Cipsoft did it to prevent people from seeing the moment of respawn. But how exactly does it work?
It's all based on how much info is sent to the client. Being on the surface you receive all floors from ground level to above (0 to +7), hence standing on the ground in Elvenbane castle you may block respawn of a hunter on the tower. But you will NOT block respawn on any of the floors below! That's because they're not sent to the client, so there's no way you could technically see those spawns.
You may only block underground resps if you, yourself, are also in the underground level. Then it works for 2 levels below (if exist) and 2 levels above (and your current floor, of course).
Because some people may find it too harsh, there's one important thing to add here. When the respawn is blocked (by someone looking) timer does NOT stop nor resets! Monster will not appear as long as you keep looking, but if the timer has already ended it's enough to just go away for a few seconds and then back - monster will already be there.
Some guys also asked whether it's possible to stand so that respawning monsters would keep coming to the player themselves. Yes, it's possible, because monster's sight is 10 squares, whigh is greater than player's sight. So you can stand in a place far enough to not block the resp, but still so close to have respawned monster come to you each time.
Overspawn
Overspawn is an old feature that existed in real Tibia prior to 7.5 version (in which it was replaced by anti-luring). Because no OTS has ever used it (none that I know of), it's been quite forgotten. The way it worked is following: when monster is lured for more than 10 squares away from its home - it becomes 'homeless' and its new instance already starts respawning. It works the same when monster changes its original floor (e.g. roped up). That feature existed to prevent empty respawns due to all monsters having been lured far away (impossible to find).
Also worth to mention that overspawn could only be triggered when monster was in aggressive mode (unless roped or thrown in a pitfall). When on idle or fleeing monster was unable to cross the border of 10 squares. So monsters can't just walk away by themselves causing new spawns.
Gif taken from old .rec. Poison spider can't go further because it reached the limit of 10 squares and is fleeing:
However, it would flee anywhere if it had passed the line before (when chasing player), becoming 'homeless' (new poison spider spawning).
Loot!
Montster's loot is generated at the moment of spawn, in monster's constructor. What you may find interesting is that monsters have a virtual equipment with slots, just like players. When items are generated they're put in corresponding slots and may have an effect on the monster, e.g. by rising its armor. In old Tibia it was quite noticable when hunting warlocks with traps (for invisibility removal trick). Trap item has constant damage of 30, but affected by armor. Armorless warlock usually would take damage, while warlock with blue robe or golden armor would block it most of the time. That way one could deduce whether it was going to drop any armor piece. However, it only worked when certain armor piece was placed in its right slot. If e.g. black knight carries both knight and plate armors, only one of those will work, because the other one would be placed in hand or arrow slot (due to armor slot being already used). You can tell which item was on which slot by checking the order in monster's body - it's exactly the same as for dead players, and go as following: arrow slot, ring, boots, legs, right hand, left hand, armor, container, amulet, helmet.
Some items though are always placed in a bag, which is only generated when needed (not counting bags and other contaiers that are added to the loot list - those always drop empty and take hands/arrow slot). Those items are weapons, shields and everything that expires or wears out. So weapons/shields will NOT rise monster's attack/def abilities, because they're carried in a bag, not inventory. Bag is also generated for items that can normally be placed in inventory, but all possible slots are taken. E.g. if demon drops 4 stacks of gold and no other items - 3 of them would be in eq, using both hands and arrow slot, and the 4th stack would go to the bag (no more slots to put gold pile in). To sum it up, some items can drop both in a body or a bag, while others only in a bag.
Items can be put in a bag up to its capacity (8 items), if more are generated - they will be skipped due to lack of slots, and simply not added to the loot.
All the pictures, except for the one with my nick, come from various old .rec files recorded on youtube.
That's pretty much it, I hope that gives some clarification for those who were confused. Players are of course free to make their proposals on tweaking the game, but it should always be done with a knowledge of how things actually work, so it won't be based on wrong asumptions.