The concepts of what constitutes as “Good” or “Evil” are entirely subjective, and are based upon one’s perspective. After all, even the most righteous person will be viewed as a villain in someone’s story.
No villain is evil for the sake of just being evil. They are often motivated by a skewed ideal or concept of what they must do to improve the world. Others are misdirected or manipulated by others, and simply don’t know any better. That said, villains don’t view themselves as villains, but rather, as heroes. They believe their cause is just, and that the results of their actions will be positive.
All the while, heroes may or may not be overzealous in their behaviors, and as a result may appear as villains themselves, when viewed from an objective standpoint.
So how does this translate to role-playing? First of all, players should utilize this information when considering their character’s moral views and motivations, and whether one might consider their character a hero or villain. In doing so, they should also understand that other characters who work against them are doing so for purposes appropriate for their character–just because a character is evil or simply a jerk, doesn’t necessarily mean the person playing the character is the same way.
Game-Runners should utilize this information when designing their NPCs–knowing that villains truly aren’t evil for the sake of it, they could implement detailed backstories, motivations, behaviors, and ethical codes. Likewise, NPC dispositions might be affected by both NPC and PC behaviors. After all, mercilessly cutting down anything that appears to be a monster, killing any bandit–including those who are simply struggling to make ends meet to feed a family–or ruffian, or otherwise behaving as a “murder-hobo” would likely prompt common folk to view adventurers as homicide-happy sociopaths with a tendency toward kleptomania.