To my understanding, a Player Character (PC) is any character you have direct control over. A PC does not have to be "you". A player may control a party or army of PCs, although in an army they're more often refered to as units as they tend not to have distinctive characteristics. In something like Warcraft where PCs will sometimes go off and fight on their own accord, this is an instruction you gave them: guard this area. Flaws and limitations in the program do not reduce this title of PC.
A Non-Player Character (NPC) is a character that the player cannot control. The character may be a merchant whom with which you trade, or you may be able to influence them to aid you in your quest. NPCs can also be opponents, usually fitting into class catagories (Warrior, Theif, etc.) Reguar monsters aren't called NPCs for the same reason army units shouldn't: they're not distinctive characters, just extras.
So if you control a party of 6 characters and they all do your bidding, they are PCs. If one of them cracks it and goes off on their own, they become an NPC. If one joins your party, but fights on their own accord, they are an NPC who wishes to travel with you.
For example: in Black & White, the only PC is the Hand of God. The creature is an NPC who can be greatly influenced by you and who will follow your orders, but ultimately has a mind of it's own. Other gods and creatures are NPCs as well. The villagers, though individually named, are not NPCs because they have no distinction. They can be given a race and a job and a house, but aside from that, they're exactly like every other villager. Any villager can do any job and live anywhere with no penalty or bonus. They're not individual.
