Where to Start (CSC)

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In a sense, NPC creation is a part of both world and adventure design. NPCs exist in the DM's world in much the same manner as a city, a castle, or a dungeon. Theoretically speaking, the DM has placed them in his world to fulfil a specific purpose, such as running the dry goods store, owning the tavern, ruling the land, and so on. Chances are that the DM has even given these folks names and decided whether they are young or old, male or female. But beyond that, there is either nothing or a generic stereotypical personality.
Unless the DM has unlimited time available, he will want to restrict the amount of detail he creates for each of the NPCs in his world. It would be nice to know each stable boy, shop keeper, or monster as individuals; to know their fears, desires and personality quirks, and, when necessary, roleplay them as exciting characters. The truth of the matter is that defining characters as personalities takes time. Therefore personalities are developed only as much as will be needed to make good game play.
What determines the right amount of development? The answer lies in the NPC's importance to the DM's world and to the plot lines of his adventures. Greater importance means greater development. Just as in the movies, not every part is a speaking part. Some characters just stand around to fill out the crowd scenes-they remain both nameless and faceless. Others exist only to fight the player characters. Time spent developing such characters will be time wasted.
However, if the PCs will spend any time in conversation with an NPC, such as the local tavern keeper, a bandit chieftain, or a favorite informant, the DM will want to personalize that character, give him an interesting appearance, unusual speech patterns and a personality quirk or two. Unless the NPC is to be a key part of an adventure, his background and motivations are irrelevant to the game. Once the DM has rounded out the character as described before, he has enough ammo for role-playing without worrying about fulfilling the character's inner needs.
Yet when an adventure revolves around an NPC or if an NPC must play an important part in the lives of the player characters, such as becoming a patron or a henchman, then that NPC deserves the full treatment. The DM should take the time to fill out every aspect of the character's background, appearance, possessions and personality.