I knew darksouls was a multiplayer game, but could never wrap my head around how. Was it like the way Fable 3 was suppose to be where you just jump in where every you want into other peoples campaigns?

Not quite. As far as playing Co-Op, the person who's the host has to "summon" someone else into their world via them leaving a sign on the ground with a certain item. You can only have them in your world if they're close to your level, and if you're human (as opposed to Hollow, which is a whole different mechanic). For versus and PvP, you use a few different items to "Invade" other people's games. You can only do both things in certain areas, as long as the boss in the area hasn't been defeated.

you can show up as a monster?

More like an evil spirit. They're called Dark Spirits in the game. There's also a cool group in the game that lets you hunt down the Dark Spirits as a Spirit of Vengeance.