Actually, it does. In Oblivion, NPCs went about their business all over the province no matter where you where. A few of them even travel between cities.
Yes, but, how to explain this..
When you were not in the direct area, the game did not render the NPC's.
It was all just..code.
Now I know that games are all just code but I mean that.. stuff didnt happen.
For instance, an Oblivion NPC that travels from Chorrol to IC every tuesday.
If you were not in the direct area and his 'sprite' wasnt active, the game didnt walk that character down the road
physically.
That is why travelling NPC's never died unless you were around, they did not encounter hostiles because in a very real sense they did not use the game world to travel.
The poster above on this page found a dead Altmer. That means he was in the area, the game 'knew' the NPC should travel there now and put him on the road.
If he had fast travelled, the NPC would have lived.
I hope Im not too confusing.
Same goes for dragons in Skyrim I bet.
When youre not around, neither are they.