IMO, people using NPC as an insult have it backwards. What they mean is that you receive tasks and ideas from them to carry out for cash. That's what players do.

The blacksmith tasks the protagonist to get a Dragon's Teeth or whatever and pay 100 Golds in return(never played TES, sorry if this isn't a good example). The player has no control over the blacksmith; the blacksmith is in full control of the situation. The blacksmith is an NPC. The protagonist is the player. But then some thinks the blacksmith must be the player, I suppose. The fact that this sometimes seem to happen almost puzzles me.