Players will build space ships and space stations of various sizes for civil and military use, pilot ships and perform asteroid mining. Inspired by reality and by how things work, Space Engineers strives to follow the laws of physics and doesn't use technologies that wouldn't be feasible in the near future.
The MMO utilizes a realistic volumetric-based physics engine: all objects can be assembled, disassembled, damaged and destroyed.
Source of information: Keen Software House press release.
No where on this games website says that it is an MMO. Yes, the developers still plan on creating an MMO just like this, but this will not be the MMO.