Our GM told us that we had roleplayed our way out of one or two combat encounters, by rolling some good diplomacy checks and the clever use of a "Charm Person" spell.
We payed off thugs to leave an NPC alone (only then to start harassing that NPC ourselves of course).
Oh my word, the houses that you get to visit. My sorceress had a fangirl moment while meeting a very important archdean.