Will Pokémon Sword and Shield have random encounters?

What is a random Pokémon encounter?

Random encounters are the types of Pokémon encounters that each main game has had since the series' inception. This means that while you are walking in an area, you will randomly instigate a battle without seeing or knowing what Pokémon you are battling beforehand. These can happen at any moment at locations where Pokémon can be found, and you are not given any indication as to which step you take will set off an encounter.

How does it return with a twist?

Game Freak is tweaking the usual way random encounters occur in Pokémon Sword and Shield. Instead of being completely random, the company is essentially taking away the randomness of the engagement aspect and are focusing on the randomness of the Pokémon themselves. What this means is that an exclamation point icon will pop up indicating that you can do battle with a random Pokémon, as opposed to seeing that Pokémon in the overworld or traditional random encounters where you have no idea when a battle will begin.

What is an overworld Pokémon?

An overworld Pokémon means that you can see the Pokémon walking (flying/swimming/etc.) in the world around you. You can interact with or avoid these Pokémon on your own terms. There is nothing random about these encounters because these Pokémon exist as tangible objects in the world, almost like an NPC. These are the types of encounters that were introduced in Pokémon Let's Go. Simply walk up to them and you'll start a battle.

How do we know that both are returning?

Both types of encounters were shown in a trailer for Pokémon Sword and Shield, and Nintendo also plainly stated as much in a tweet.

What you end up getting is a mix of both encounter methods.