It could synced to the time zone that the majority of players on a server play from, changing from light to dark as the sun rises and sets. Or, it could be synced to each individual account, to their timezone, sun, ect.
I believe something like this was mentioned above, but instead of have a day long day time it could be shorter then a day. Say 12 hrs for a day and night cycle, allowing for two cycles of the day and night cycle per day. That way everyone has a equal oppurtunity to see the night and day at work.