Hmm, here’s another area where my DMing is probably sub-par — I don’t really do much with NPCs. Once in a while I come up with something interesting but most of my NPCs are either jerks or hapless victims. Partly it’s laziness, no doubt, but partly it’s me trying not to make the mistake in the other direction where NPCs become as important as, or more important than, PCs to the ‘story.’ I’ve rarely played in games where that happened but I heard about a lot of games like that when I was in a gaming club in college and now on forums and blogs. A lot of 1990s era AD&D stuff seemed to go in that direction too — Ravenloft, Dragonlance, and Forgotten Realms always struck me as being especially guilty of that.
In my current campaign, there are barely any recurring NPCs, and many of them don’t really have names — just titles: the bishop, the mayor, the sage, etc. The only NPC who gets much thought now is a gremlin named Funko who has been following around the paladin. He steals stuff from the party now and then (and they hardly notice), and speaks like a smurf (substituting “funk” and “funking” for “smurf” and “smurfing”), and generally behaves like a child, which he basically is. The players seem to enjoy him, and the paladin even spent big money to get him Raised when he got killed by ice salamanders.
So I guess my favorite NPC is Funko.