I dropped in on a couple co-op games in the beta today and the first thing I noticed was that everyone wasn’t running for loot. This is a thing of the past, apparently, as any loot that you can see is yours and yours alone.
That said, is there a limit to when loot drops for me during co-op play? Does it drop when I’m in town or if I’m around but I don’t hit an enemy before it’s killed?
Loot drops for you only off of those monsters that die within a certain distance of your character. Bashiok (Diablo 3 CM) confirms this with a tweet (link).