No.
Yes, if you have the recent update of minecraft 1.2 it will work.
N.P.C stands for Non Player Character. It is basically any person that is controlled by the game and not by a human being.
There are no cities in Minecraft as of yet, only NPC villages which spawn naturally in the game world; cities must be built by the player(s) of Minecraft.
No.
you can get it from npc villages. here is a seed for a npc village: FINAL
Because the current version of Minecraft on the Xbox 360 is not as up-to-date as the PC, the trading feature with an NPC villager does not exist. When Minecraft updates to that specific version, NPC villagers will be able to be traded with.
You can't.
There are randomly generated houses in 1.8 that are part of NPC (Non-player character) Villages. These will contain NPC Villages once 1.9 Beta is released. 1.9 has currently got a pre-release available for download, so NPC villagers appear in that.
You build your own house and you can find NPC villages in the world
Every map has them, as they are randomly generated.
You don't make it. You find an npc (non-player character) village and give the priest a diamond and he will give you a bottle o chanting.
An NPC village really has no useful purpose. It is mainly for looks and so you can interact in fun ways with the NPCs, such as using them to trigger and/or test traps.