Lionhead Studios has released a "Create Your Own Villager" web application that can be used to make a custom NPC for Fable III. Anyone can play with the app, but gamers who pre-order Fable III from select retailers* will receive an activation code that can be used to import one custom NPC into their copy of the game.
The villager creation process involves choosing your villager's gender/name/hometown, answering questions to determine personality, and customizing appearance. The villager will appear in the game and offer a quest appropriate to its personality and alignment. After the quest has been completed, the player can continue to interact with the custom villager and even romance it, if so desired.
Here is Lionhead's tutorial for the villager creator:
*It is not currently clear which retailers will offer the villager activation code. RPGamer recommends checking with your retailer of choice before pre-ordering.