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The green area indicates the spawn area. When the game decides to spawn a mob, it first chooses a random tile within this rectangle spawn area (62-84 tiles to the left/right, 35-47 tiles up/down). If the picked tile is empty, the game then searches a solid surface right under it and spawn the mob on there. For more info about mob spawning, just check out this wiki page: http://terraria.gamepedia.com/NPC_spawning

Putting walls prevent the game from choosing there as a spawn point, thus we can effectively force mobs to spawn only on the bottom left edge of the conveyor belt slope, so that we can kill Pumpkings before reaching us.