NPCs, Non-Player Characters, are the principle sources of information about the game's lore. They are also the usual sources for quests and quest rewards, and the NPC merchants are invaluable for equipping your hero for battle.
The following NPCs will appear in Diablo 3...

Cain returns in Diablo 3, and reprises his role as an adviser and lore-master for the player. How could he not? Cain is the essential NPC in the Diablo universe. As a wise sage and the last of the Horadrim, Cain has played an important part in both Diablo 1 and Diablo 2 games. This old, classic Diablo character will definitely ask you to stay a while and listen.
Cain appears as an NPC, but it's not known if he'll pick up where he left off in Diablo II; following your character from town to town and offering item identifications and quest/plot info. He did not appear in the BlizzCon 2008 demo. He was seen previous to that, in the gameplay video. In that video the Barbarian and Witch Doctor rescue Cain from a horde of monsters in the dungeons beneath the Tristram cathedral, and return him safely to town where Leah is worried about him.
It's been twenty years since the events in Diablo II, and Cain's spent that time questing for more ancient knowledge, and trying to warn his fellow citizens that the danger is not past. No one listens, people don't want to believe or think about such things, and Cain's grown increasingly desperate. He's now a tragic, reclusive figure.
Cain's Background
Cain is the last in a long line of the Horadrim brotherhood, and he was told the stories of the brave Horadrim by his mother. He is not a warrior mage, but is more of an archivist and lore master, who does what he can to fight against evil by sharing the knowledge he's accumulated over a lifetime of researching the demons that menace the lands of Sanctuary. Cain is well known to the forces of Heaven, and has interacted with the Archangel Tyrael on numerous occasions.
During the events of the 1st and 2nd Diablo games, Cain wrote in a journal, which have been found today, many years after Diablo was (once again) defeated. The journal is aptly named Deckard Cain's Journal.
Captain Rumford is found in the small town area where new characters start their journey. He is a guard and nominal leader of the few

surviving humans in the area, and had special dialogues for each of the 5 characters. During the dialogues he imparted information about a meteor that had struck the Cathedral and awakened evil within, and either warned or encouraged the player to investigate.
The story telling mechanism of such NPC dialogues and plot devices is a simple one; the characters, NPCs and your own hero, know more about the story than you, the player, do. So players learn about the world and their own character's personality by watching and listening to the interactions between their character and the NPCs.
Captain Rumford Dialogues
Like most key NPCs in Diablo III, Captain Rumford's dialogues differ considerably between the characters. In each case Rumford conveyed the essential information; that a flaming object had recently fallen from the sky and crashed through the roof of the Tristram Cathedral. Great evil had awakened since then, and the area was now overrun with monsters. All of the characters knew this much, and said they’d come after hearing news of the fire from the sky, but Rumford's dialogue let the player know the Cathedral was just ahead, and that the area was very dangerous.
Abd al-Hazir says:
Pablo DeSoto is a gentleman with some knowledge in magic and history of the world, although not as great as Abd al-Hazir. He has been seen in and around Wortham, the small fishing village, and is quite protective of his beautiful daughter Leah.
Pablo dislikes Necromancers, and blames them for most bad things that have happened in the last 20 years, including "that Diablo incident". Besides magic, he's knowledgeable about the areas surrounding Wortham and Tristram and has insights in how the Festering Woods work including their inhabitants, such as the Gnarled Walkers.
Abd al-Hazir says:
According to Master DeSoto, the Festering Wood derives its name from the fact that everything in it seethes and roils with evil intent: even the ground itself has been known to rise up and devour a person. When pushed further in regards to the gnarled walkers specifically, he pontificated at length as to their true nature. He maintained they are vile mystical creatures from another realm who can only sustain their existence in our world by sapping life energy from men or animals. These heinous beings have shifted their appearance to that of trees, thereby luring their prey close so as to consume it whole and enrich their reserves of dark power. These beastly things move ponderously, and some are known to exude a foul stench that poisons their victims. Master DeSoto is certain the origin of the walkers, and of the Festering Wood itself, can be traced to the foul doings of necromancers, who he claims are responsible for much of the evil that has befallen our world. He expounded in full to me his theory that the "whole Diablo incident", as he called it, was tied up in their dark arts as well.