I though the rule was minimum 0.0001 BTC for 1000 bytes transaction is good fee. i paid 0.0002 BTC for 600 bytes tx.Still took 9 hours to get confirmed.it's kinda wierd.
That's no longer the standard fee. There's much more transactions made per day now and blocks are getting full. So to get your transaction included in a block you'll need to bump up the priority by increasing the fee.
What if everyone starts paying high and equal fee then what will happen?
That won't happen. But I believe the ones that are received first will be included in the block first. It would vary from miner to miner, depending on what internal rule they adopt (eg. not confirming transactions from and to X address).
In reality, everyone is probably going to pay different fees.