NPCs

NPCs (non-player characters) will move into vacant houses if certain conditions are met. For an NPC to spawn, you will need to build a dedicated House for it to move in.

Each NPC also has an additional requirement. For example, you will need to collect 50 Silver Coins for a Merchant to appear.

The Guide will spawn upon creating a world, but will also move into the first house you build. If a house is destroyed in any way, the NPC will move out, but will return once the house is restored or a new one is built elsewhere.

All NPCs are vendors, except the Guide, and the Old Man before he becomes the Clothier. The Nurse doesn't sell items, but provides healing in exchange for money.

All NPCs have a set amount of health and will take damage from enemies. If an NPC dies but the house remains, it will respawn after a short time. NPCs also have regenerating health, which ensures you don't need to manually heal them once they've taken damage and the threat is gone.

As soon as night begins (when the night music starts playing) NPC's will move to their room in the house and stand completely still until dawn. Once the dawn music starts playing the NPC's will start walking around and go through doors again.

NPCs who live in a house also reduce the spawn rate of monsters around them, the more NPCs you have in an area, the fewer monsters spawn.

Multiple NPCs of one type
It is possible for up to three Merchants and two Nurses to spawn on a multiplayer server, given their spawn conditions :