Setting Appropriate Surnames for In World Environments
If you desire NPC characters to blend in more fully with the backgrounds you are portraying, it helps to give them full names, and maybe a reason for those names being how they are. After playing one solo cRPG recently - Talesworth Arena - in which the main character you meet is the uninspiring 'Lar', it seemed worthwhile to dig into surnames and how they work.
When it comes to names, they are typically divided into two types. Given names or casual use names, and surnames or titles. There can be any number of casual use names, and any number of titles. It all really depends on the type of culture you are presenting, but even the most lowly individual should at least have a clan name, along with their own. (In the above example, Lar was the head of the guard, and a very important individual).
Surnames are typically divided into four types:
An Occupational name fits the type of work that individual does, or herhaps their family does, or has done in the recent past. Our world examples are Smith, Cooper, Wright, Thatcher, and a multitude of others. In a more exotic world, there would be more exotic jobs, and these can be converted into the pool of surnames. For example: Dragonwatcher, Egggarder, Tunneler. These actual jobs, produce titles, and over the years a given clan becomes associated with those jobs, until members drift away, seek other professions, yet still have that clan name over them.
Son of (daughter of)
Donaldson, Markson, Friarson, all are examples of 'son of' names, where a given person is the child of another, and so has their father's common name appended after their own, with the definition for son. Or perhaps Donalddaughter, Markdaughter, Friardaughter would be surnames in a matriachy dominated society? Other examples include Fitz'Patric, the Norman surname, where Fitz is used in place of ''on of'' Likewise, the Scottish use Mac and Irish use O'. You could use any style you desired, to represent son or daughter of, but keep it consistent within a given culture.
Surnames like Hill, London, York etc, in our world, are taken from the place a person comes from. It may be that they travelled the country, or many countries, and eventually settled down, perhaps having a clan name that did not fit the type of work they now did. Over time people would call them by a nickname, perhaps the place they came from. In time, this would stick as there were no other members of the clan present to decry it. So, you might have a long-extinct village half a continent away, whose name still lives on as the surname of some of its scattered descendants.
Sticking with the nicknames becoming surnames angle, travellers who settle down might have distinguishing features that set them apart forom the locals, which would be commented on, and be added to their titles. Examples of this are Brander, Brown, Young, etc. You might decide one particular family's colonial ancestor was a bit of a rogue, hence the family name of Fertile, for example. Best used only with displaced populations who settle in new areas, then over time, integrated.