Yes, the basic implementation does reject arbitrary requests. We do have a partitioned limit strategy (currently in the experimental state, which is why it wasn't brought up in the techblog). The partitioned limiters lets you guarantee a portion of the limit to certain types of requests. For example, let's say you want to give priority to live vs batch traffic. Live gets 90% of the limit, batch gets 10%. If live requests only account for 50% of the limit then batch can use up to the remaining 50%. But if all of a sudden there's sustained increase in live traffic you're guaranteed that live requests will only be rejected once the exceed 90% of the limit.
From https://medium.com/@NetflixTechBlog/performance-under-load-3...
> The discovered limit and number of concurrent requests can therefore vary from server to server, especially in a multi-tenant cloud environment. This can result in shedding by one server when there was enough capacity elsewhere. With that said, using client side load balancing a single client retry is nearly 100% successful at reaching an instance with available capacity. Better yet, there’s no longer a concern about retries causing DDOS and retry storms as services are able to shed traffic quickly in sub millisecond time with minimum impact to performance.
Edit: In terms of how they decide what to reject, from reading the blog post, there is a queue and there is a limit to how big the queue can be. Requests that come in while the queue is "full" get rejected immediately. They don't wait in the queue and timeout.