When you live in the same place your entire life, you see a lot of familiar faces wherever you go. It is both a blessing and a curse.
I find that I pretty much try to acknowledge everyone I pass on the street or, say, in the halls at the hospital when I'm there. Sometimes people talk to me as though we are old friends, but I have no idea who they are. Sometimes their faces are very familiar, but I can't quite place who they are or how I know them.
The most difficult thing is seeing someone out of context. I recently saw someone on the street that I knew I should know, but I couldn't quite place them. We smiled and said hello, but it was hours later when I realised that this person took care of me many times at a local store - I knew them well! But taken out of context, I was lost.
The other problem we have our here is the celebrities among us. One day I was standing in line at a restaurant when I turned to look at the person who had just walked in and was behind me, and I recognized the face immediately. I began to say hello but caught myself just in time, realizing that this was someone I had watched on a morning TV show only a few hours earlier. Naturally, she seemed like an old friend because I see her nearly everyday! But she would have no idea who I was and I certainly didn't want her to feel uncomfortable.
Faces I know. Names not so much. So I try to smile and hope no one notices.