NPC is a role-playing term used to describe a 'Non-Player Character'. Cho, at the sushi bar, is a good example of an NPC.
Not all NPCs are that souless. Sometimes a scene will come up where NPCs are needed to interact with other characters. These interactive NPCs are portrayed by volunteer players or Admins as nessicary. They are usually cannon fodder or useful plot devices. Think extras in movies.