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An example of a player nametag
Nametags are a display of a player's or npc's name above their head. In multiplayer, player nametags appear for the first 5 seconds they're on the players screen, then fade away. At any time the status button (Alt Key) can be held to see nametags. They will remain visible as long as the button is held. A friendly npc's status message can also be viewed this way.

It's been confirmed that player nametags won't appear in the dark, adding an added element of stealth to PvP combat.[1]