As opposed to a player character, a non-player character is a person who is basically filler, needed for the moment or for some particular plot point, but is of no interest otherwise. In the movie of your life, they are an extra, or at most a walk-on. They are the background, but not the foreground, in your life.

See real life. See 99% of humanity.

In Interactive Fiction (IF), any character other than the protagonist (the one the player controls) who the protagonist is going to interact with. One of the great unsolved problems of IF is getting decent NPCs - one's which won't do or say completely innappropriate or unrealistic things. Part of the problem is the ridiculously huge number of things the NPCs ought to be able to react to. And that's before you even begin to consider trying to make them do stuff on their own initiative. Of course, in essence the problem of making a truly perfect NPC is equivalent to the problem of AI. So it's not going to get solved any time soon. But see believable agent for an account of why that isn't actually necessary to get pretty decent NPCs.