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A non-player character (NPC) helps to advance the plot and participates in the action, but is controlled by the computer, rather than the user. An NPC may play a starring role (the villain, the love interest, or the trusty sidekick) or only a bit part (the dwarf who keeps throwing axes at you).
Implementing believable interaction with NPCs is one of the most challenging aspects of IF. See Emily Short's Galatea.