From Arcanum Illyria
Non-playable characters (commonly called NPCs) are computer-controlled entities that either attempt to behave like intelligent game participants or just passively provide simple player interactions. Illyriad has, to an extent, both types of NPCs and both come in the form of factions. Nature factions are dumb critters that simply occupy space and defend themselves when attacked, while monster and humanoid factions will spread and claim/control territory in similar fashion to actual human players. The latter are still quite simple models, however, as opposed to complex AI-driven entities. Their goals are simple and their actions purely reactionary.
NPCs can be found camping on various squares throughout the camp. These parties can be attacked--or in some rare cases, reinforced--by player armies. NPC camps on the world map will be described in terms that approximate their numbers.
Critters are creatures of nature--non-sentient beings that randomly inhabit appropriate climates in the game world. They don't do anything hostile, but you can beat up on them for experience and gold.