Wikia

Spawn or Spawning is when your character, a monster, or an NPC appears in a world.

Spawn Point

A spawn point is the location where your character first appears in the world. This point can be changed by using a Bed. If you use a Magic Mirror you will teleport to your spawn point, whether it is the world's original spawn point or one you have set with a Bed. If you set a spawn point to a bed and the bed is destroyed, your spawn point will be returned to the original place. Note that when you exit the game and re-enter the world, you will teleport to your spawn point, not your last location. However, some Multiplayer servers have a mod (sometimes called a plugin) that makes you spawn in your last place when disconnected.

NPCs

NPCs will spawn once certain criteria are met, they require a home and each NPC has a special criteria that has to be met. NPCs will spawn close to their home, but have been known to get stuck in caves and holes before finally settling into their new homes. NPCs only spawn during the day and only one NPC can spawn every two minutes. They can only be despawned by dying (the Guide can be killed by equipping a Guide Voodoo Doll and attacking him).

Monsters

Monsters spawn differently from the player. Each monster has certain areas and circumstances in which they can spawn. Monsters only spawn off-screen (with the exception of monsters that spawn off bosses) and have different spawn rates. NPCs will help lower the spawn rate of monsters near their homes. Placing walls and adding light will also stop monsters spawning in an area. Also, activating certain statues will make certain monsters spawn.