It's lag related. Everyone appears on your screen as a generic skin until whatever they're actually using uploads to your system. It gets worse as the player count goes up. If you watch one of those people with the generic skin long enough, you'll see it change to whatever skin they're actually using.
There are 10 types of people in the world. Those that know binary, and those that don't. GT:Talon Omega. If you send an FR please tell me where you got my GT.
Back in april and may there were hundreds upon hundreds of folks playing all in one spot. They all look the same, as the above post says, to help with lag. Now, there is no excuse since there aren't a hundred people total that play. But hey, the devs set this up in a way that made sense...and then did really stupid things that made no sense.