NPN and PNP refer to the arrangement of the pieces that make up the transister. The practical result is the direction of current flow.

A bipolar junction transistor is made up of three pieces of silicon. Depending on what is added to the silicon, it will be either N-type or P-type.  An NPN transistor has a piece of P-type silicon (the base) sandwiched between two pieces of N-type (the collector and emitter). In a PNP transistor, the type of the layers are reversed. Below is a typical cross section of a transistor.

Example uses

Since a PNP transistor works more or less the opposite of an NPN, it can be used where negative voltages are involved.  One such example is in amplifying an AC signal* for driving a speaker. A speaker moves air to create sound. While you can use a speaker with a DC signal (that varies between 0 and some positive voltage) that pushes the speaker cone outward (and relax to it's neutral position) to create a sound wave, you can create louder sound if you also pull the cone back.

Below is a simplified example of just that. when the input is positive, the NPN transistor conducts and drives the output toward +V. When the input is negative, the PNP transistor conducts, driving the output toward -V.

In my digital electronics tools learning guide is a DIY logic probe that uses a PNP transistor to drive one of the LEDs. When the PROBE input is high, T1 switches on which, because of the resistors making up the voltage divider on its collector and emitter, drops the voltage at the base of T2 enough below its emitter (at VCC) to cause it to switch on, thus turning onLED1.

_{* An AC signal is one where the voltage can be positive and negative, and is typically constantly changing.}