Database

For mmorpg this is worst approach. You should store all data about player’s character and game world in database. At first because of latency. Its much faster to put\retrieve data from database than from file. Second - file system limitations. If you plan to have more then few players online in same time, then your server will constantly be writing big amount of data to file system, because you can’t just put “diff” into file, or retrieve just specific data(char position) without reading\saving whole file.