NPC stands for "Non Player Character". It is a term that originated from Dungeons and Dragons to mean a creature that was not a monster but was not controlled by a player. An NPC creature would be something like a bartender, a merchant, the village mayor, etc..., who was controlled by the Dungeon Master.
This term has migrated to online games, and the term has deviated somewhat. An NPC is still any creature not controlled by a player. But it is sometimes used to describe monsters as well, if the game has any.