Alderxian on 10 July 2010
The servers went down because they were switching from the Halo 3 servers to the more powerful Reach servers, like they did with Halo 2 before Halo 3's release.
Source: http://www.bungie.net/News/Blog.aspx?mode=news#cid27250
As for how many people were playing, maybe you were playing on Bungie's day [7/7] where everyone had flaming armor for one day.
