In NPL, what is a "party", and when is it decided who the parties are?

A party is an entity with a genuine interest in a protocol — designated at the moment the protocol is initiated — that is thereby allowed to access and interact with it.

When a protocol instance is created, its parties are named up front. A party is not just a username: it is defined by claims that combine two things — the rights the entity holds (what actions it may perform) and the data scope it is limited to (which records it may touch). Only entities designated as parties on that specific protocol instance can act on it; everyone else is simply shut out. In a rent contract, the parties might be the tenant, the property manager, and the operations manager — each bound to that one contract, not to contracts in general.

Go deeper:

• Role-based access control (Wikipedia) — the broader model of matching users to roles and permissions that a protocol party specialises down to a single instance.