Coalesced Realm is a label that appears on a player tooltip to denote that player is from another Realm, and is temporarily sharing the same zone 'instance'. Players can be 'coalesced' in any WoW zone, including regular world zones, like Elwynn Forest. See Coalesced Realms for more information.
How these players are allowed to interact differs from interacting with players from your own realm or with players from 'connected' realms. Currently players that are 'coalesced' are allowed to Group and Whisper.