Civilians are the citizens Xenonauts needs to attempt to protect from the Aliens during missions. Civilians always appear on Terror Missions and occasionally at UFO Crash/Landing sites. Civilians generally attempt to evade the Aliens or cower in fear.
Civilians are very weak and will almost always die in a single shot from an Alien weapon, it is the commanders obligation to attempt to keep as many civilian alive as possible, however there is no penalty for civilians dying.
Prioritise keeping your soldiers alive over civilians.