With AOE fights so prevalent in PvE since the release of Wrath, name plates can be more of a burden than a help. With that in mind, Blizzard has unveiled plans to change the way they work. On the public test realm the plates will simply overlap instead of trying to sort themselves out. This should stop the "flickering" effect which can be seen in situations like phase two Onyxia.

Name plates will also have a longer range if the changes go live, as well as being blocked by line-of-sight objects. However, Zarhym reassured PvP players by stating that arenas would be unaffected by the change. "Pillars and bridges in Arenas will not hide friendly or enemy nameplates." This is a very important factor, especially where kiting classes like hunters are involved.

On a similar note, Blizzard is looking into adding name plate options for pets. The ability to disable the plates for totems is already live on the PTR under the interface options.

Source: MMO-Champion