Village

NPC villages are a new feature that will be added in Beta Version 1.8, also called the "Adventure Update"(Although the NPC's will be added in an extension of 1.8). It appears that the buildings in the NPC villages will be naturally generated. The number of buildings in villages, and how much space they take up is unknown. It is most likely that the number of buildings will be random up to a certain number, and that the buildings may also have different sizes. It is unknown what kind of NPCs will spawn in and around the buildings. It will, however, most likely be Humans or living Pigmen. It is also unknown if the NPCs will be passive, aggressive or neutral. How common these villages are is also under speculation. One can assume that they will be rare so that finding one is more of a rewarding experience. For the PAX demo, however, Notch made it so that NPC villages appear near the spawn so people could see them.(http://www.twitch.tv/realnotch/b/293537610 @ 3:37)

A picture of NPC villags was released by Notch. It shows 12 buildings, but it could be 11 as two of the buildings on the sandy beach seem to be merged. The buildings are made of Cobblestone and some Moss Stone, they have a Wooden door, they also have roofs made of Wooden Planks and Glass Pane windows, though their composition could change by the 1.8 release. Although they are all the same type of buildings they do appear to be different sizes. The two closest to the front on the sandy beach have roofs that are three blocks high, while one in the top left hand corner has a roof that is six blocks high.

The picture only shows the exterior of the buildings, however, videos recorded during PAX also show the interior.

More info on NPC villages will almost certainly be released soon as the adventure update is around the corner and Notch has agreed to be less secretive about it.

NPC Villages will have their own biome in order to solve many of the problems currently hindering their development.

NPC Villages will include some other buildings than just regular houses. Jeb has already hinted us of Village well and a smith. The smith will use lava to forge his items- in fact, he often sets the village on fire according to Jeb_. During the PAX demo, farms could be seen in the villages, although the only crop growing was wheat.

PAX
On a live stream off his android phone at PAX notch stated that NPCs have not been added to the villages but they are coming, eventually. The majority of the NPC structures are made from wood based resources, with frames of cobblestone, and the footpaths are 3 blocks wide and made of gravel. The gravel appears to replace the top layer of dirt upon generation of the village. (at 4:35)

Old Interview of Notch
Notch once answered some questions about an idea he had, NPC Villages, where he revealed some thoughts about them:
 * If you are good to them (giving them items), they'll give you items back.
 * If you are bad to them (attacking/killing them), they'll try to do the same to you.
 * There would maybe be a chest, containing special items, but raiding it will anger the owners of the town/chest.

Trivia

 * The picture of NPC villages also shows what is being called a Huge Mushroom. It is doubtful that they have anything to do with NPC villages.
 * Notch originally worked on NPC Villages by himself, but eventually gave the task to Jeb, so that he could work on other things.
 * Jeb confirmed in an interview that NPC villages will be optional.
 * According to Jeb, NPC's for the village will be delayed until Beta 1.9.

Gallery
NPC-Dorf Villages de PNJs