UPDATE

Dinnerbone just announced that they are allowing NPCs again but only until 1.8. This is great news, but seems to be only a temporary victory. NPCs will possibly be removed again in 1.8. Please continue to inform people about this issue and encourage them to sign this petition. Mojang are listening to you.

https://twitter.com/Dinnerbone/status/455643465406513152

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Second Update

Dinnerbone says they will revisit the issue in 1.8 and try and come up with a compromise that works for everyone. Looks like everyone's efforts on this have been a success. Congrats people :-)

https://twitter.com/Dinnerbone/status/455702256193916928

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Do you use a plugin to disguise as other players? Do you use an NPC plugin to make fake versions of other players? Do you enjoy playing on innovative servers that make Minecraft do amazing new things?

If so, you should be extremely concerned right now. Since version 1.7.6, Mojang have updated to a new skin system that will prevent much of this. Disguising as other players, or creating NPCs based on other players, will become impossible.

Why did Mojang do this?

Skins are now cached on servers, not just accessed directly from the Minecraft skin servers. This would allow servers to display a different skin if they chose. Mojang decided they didn't want servers meddling with skins and locked it down.

Why we should be worried for the future of Minecraft?

One factor in why Minecraft was a mega success and not just a passing fad was their openness. Instead of adding piracy restrictions they added offline mode. This led to some awesome stuff like bungeecord being possible. Instead of sending lawyers when people were decompiling their code and modifying it, they allowed it and even provided assistance. This led to Bukkit, Forge, and the entire modding community existing.

This new skin system is the total opposite. It's controlling and limiting. Cool projects like citizens and disguise plugins are now crippled. Ambitious projects like miners-movies.com have been left in ruins.

Minecraft is worse off for this change and for no good reason. Players were not asking for this. If a server could change their skin I highly doubt they would complain. They will complain that disguises no longer work. They will complain that citizens no longer works. Lots of interesting projects will no longer happen. The possibilities of Minecraft just got smaller today.

What happens if Mojang don't change?

Some projects that rely will cease to exist once 1.8. Other plugins like DisguiseCraft and Citizens lose the ability to work with players. Many new innovations will never happen. If servers were allowed to modify skins you'd see some awesome new developments. The ability to have team uniforms in team based games. Plugins that change your avatars clothes in-game. The possibilities are endless.

How can I help?

Let the Mojang developers know how you feel about this. Send the developers a tweet on Twitter. Email them. (Keep it civil)

Tell your friends about this so they can let Mojang know their opinion.

Sign the petition. It's important we show Mojang that a significant number of players do not want NPCs disabled.

If you are a YouTuber please make a video informing your viewers.

If you are a server owner please inform your players.

Remember to be civil. Mojang have shown that they respond to players opinions on matters if enough people make their voices heard. Being rude or aggressive is counter productive.