This can depend on how much respect the NPC has for you, so if you are a newbie stranger, then you would not attract any noticeable attention to yourself except for guards and the like as they watch any new face to see decide about the personality of the new face, and if it is needed to watch over them more or less.
But as you gradually gain levels, fame and the respect of the local people, they would tend to show more respect in your attendance, and in later stages, maybe even stop what they are doing and give you their full attention, whenever you are near, or at least when you start to converse with them.
High infamy might as well have a bit similar effect on audience, but for other reasons.
I hope you're right. They've already mentioned an example of NPCs reacting differently when you walk into their home at night, based on your disposition with them.
When you talk to someone, do you walk up so close they can see the pores in your skin and stay that close for the entire conversation? Oh, you do? I'm just going to leave now...
My point is, the conversations in Oblivion looked ridiculous. Nobody talks to each other that way.
I can already imagine the Oblvion LARP. LMAO.