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The maximum number of players in multiplayer varies based on the settings of the server.
Multiplayer worlds function no different from single player ones, other than an increased monster spawn rate (which is not affected by the number of players, only by the fact that there is more than one player). The items in the player's inventory in single player are also available in multiplayer and vice-versa.
In multiplayer, the PvP and team buttons that appear at the top of the equipment UI can be used.
The PvP button allows players to activate PvP mode, which makes their attacks collide with and damage other players who also have PvP enabled.
The team options allow players to join color-coded teams. Players will be able to see how far from every other member of their team they are (in feet), a general indicator of which direction every other teammate is in, as well as how much health each member has remaining (if they are not damaged, no HP indicator is drawn). Players on the same team are unable to damage each other via normal means, even with PvP enabled.
The game has a built in anti-cheat mechanic, that will kick you if you try to cheat.
Sometimes though the game considers using the Aqua Scepter cheating, and you will get the message shown on the picture. It will also kick you for building too fast, using the Minishark and other fast projectile weapons in battle (especially Bosses). The Vilethorn is also a weapon that can trigger an auto kick. It can also kick the host. This is most likely a bug and was thought to be fixed in the future, but most likely will not be.
As of update 1.3, Multiplayer has been streamlined so that players no longer have to join via IP and port forward. Instead, they can join Steam friends who are on a server.