Everyone probably already encountered a couple of NPCs just standing there, doing nothing. When you talk to them, they respond with "hiya stranger". When you talk to them again, they repeat that exact same sentence. After the tenth time of "hiya stranger" you begin to wonder whether the person was on drugs or not. What is the purpose of this NPC? Exactly: a useless object to fill the otherwise void space. Players can enjoy a "guess who holds the quest" puzzle. Things get even worse when each NPC is called "stranger x" or "villager y". This does not give them any personality and give you even less reasons to replay the game since the living world feels artificial and dead. There's a difficult balance to be kept within a city full of NPCs: do you want extreme activity but soulless beings or a less crowded area, where everyone has their own personality and interesting story?
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http://www.jefklak.com/Articles/RPG-NPC