Interaction is a core component of a table-top role playing game. The players interact with the world the Dungeon Master creates through the Dungeon Master. Naturally, the world is full of all kinds of creatures and characters that have their own roles within the game world. To keep the world interesting there needs to be a variety of characters and to keep the world believable there needs to be some kind of consistency. Being able to achieve those kinds of characters is no easy feat and it is for this reason that I hope to overview some general ideas that I hope help people deal with this element of running a game. It is mostly inspired by certain things I've seen occur during playing and also deals with combat rules.
Dungeon Master Talking to Himself
I've seen quite a few games where clearly a lot of effort was put into planning the world and the characters the party was interacting with. However, serious issues started to come up when non-player characters had to talk to non-player characters. From all of the games I've seen it tended to be one of two things. The Dungeon Master could have been quite new to the role and as such didn't feel comfortable talking to themselves. In that kind of situation the only real solution is more practice from the side of the Dungeon Master. However, it is also possible that the Dungeon Master simply forgot to consider how the characters interact with each other and feel about each other (the people I asked found this kind of situation to be quite common).
Take for example a very simple example of a high ranking lord and one of their knights. It's easy enough to just define the two characters individually (important life events that shaped their character) and forget to consider how they might feel about each other. Does the knight like his boss? Does the lord have a grudge because of some history? Are their interactions formal when behind closed doors with the party or informal? If none of things are given any though it becomes easy to see why someone might freeze for a second while trying to make it up on the spot.
Combat is Character Interaction Too
There is nothing wrong with having a character that is incompetent in combat. There is nothing wrong with having a character who is a coward in combat but talks big outside of it. However, it's important to remember that combat is a character interaction and will be influenced by the character of the individual. Zombies shouldn't be as good at forming a plan as the 18 intelligence wizard who is ordering them (18+ intelligence zombies excluded, of course). I've seen and played in many games where the personality of the enemies didn't factor into the battle strategy at all. Instead, it was based on what would be challenging to the party. The party should be challenged when it is appropriate but the way the enemies behave should still remain consistent with how the characters were established before combat. A cowardly wizard can still be a challenge even when they are hiding behind a wall a long distance away and instead ordering their henchmen to do the fighting.
I also want to emphasize that balance is important in these kinds of situations. Making some kind of detailed back story for all characters your players run across including the kobold your players see for 15 seconds before shooting with an arrow is a lot of work for not much payoff. Big important characters should, however, have a back story and a personality that will play a part in determining how they behave when in combat or other threatening situations. If a fight is being improvised, considering what the enemy might be feeling and making decisions based on a quick personality you invent on the spot is a possibility and provides a break from always taking a tactically superior choice (it also makes the enemies that are well enough trained and organized to always make a tactically good move that much more special).
Consider two ideas when planning or running role-playing game sessions. Every interaction a character has (including combat) will be influenced by their personality and that considering the relationships and history characters have with each other is important when thinking about their interactions (don't forget to develop their own personality's as well).