Pedestrians appear in all Grand Theft Auto games. Simply put, they are civilians and residents of the city you're in.
Pedestrians come in all shapes and sizes, ages, and races. Each have their own dialogue, and interact with eachother as well as the player.
Depending on what city, district, and time setting you're in, the civilians reflect to it. For example, in Vice City, you'll find many civilians dressed in 80's apparel due to its time setting. You will also never see a hobo in an affluent area of town, nor a businessman in the country.
Also, certain pedestrians, generally, drive certain vehicles. More wealthy civilians typically drive more luxurious cars, and poorer pedestrians typically drive less-appealing vehicles.
Aside from simply interacting with eachother and the player, certain pedestrians can also perform other tasks, such as car-jacking the player. Some even fight when provoked, or try to retrieve their car if you happen to steal it from them.
Hookers are a special type of pedestrian that are able to enter your car and able to have sex with you, replenishing your health bar, for a price of course.