That’s the selection for Normally Open / Normally Closed switch operation: whether the switch closed or open when a metallic object is near enough to activate the switch:
- NO = switch closes when activated
- NC = switch opens when activated
A closed PNP switch pulls its output high and a closed NPN switch pulls its output low.
So there’s an electrical choice based on the circuit the switch is driving (PNP vs NPN) and a logical choice based on how the switch operates (NO vs NC).