There's so many of them. I have to assume they're spatially limited. You enter a zone, or an area, and the system loads up all of the quests located in that space, then it runs through to determine whether you qualify for them.
As for quests that you're on, that's a bit more straightforward, since you're so limited to how many you can carry around with you at any one time. Then, every event can practically just be brute forced across your pending quests to see which ones get progressed, etc.
But it was always a curiosity to me considering the magnitude of the quests available how most anything can trigger quest progress.
There's also the whole achievement system, which perhaps is similar in design.