Can someone please explain why neighbouring group participation happens?
Does it stabilise the carbocation? If so then is NGP dominant over an intermolecular SN2 reaction (especially in aprotic medium)?
There may be some confusion over what neighbouring group participation (NGP, also sometimes referred to as anchimeric assistance) is. Carey puts it quite succinctly:
When a molecule that can react by nucleophilic substitution also contains a substituent group that can act as a nucleophile, it is often observed that the rate and stereochemistry of the nucleophilic substitution are strongly affected. The involvement of nearby nucleophilic substituents in a substitution process is called neighboring- group participation.
Source: Advanced Organic Chemistry (Part A). Francis Carey.
Rather than a discrete carbocation forming, which is then stabilised, NGP usually (though not exclusively) occurs via two consecutive SN2 processes, with overall retention of stereochemistry.
The reason why the NGP happens, rather than an external nucleophile just doing the substitution is generally due to the fact that intramolecular reactions happen at a faster rate than intermolecular ones, since this removes the necessity of encounter between nucleophile and electrophile (the two are essentially tethered together). The initial internal attack forms a ring (usually 3 or 5 membered for reasons that should be familiar to you) which may then be opened by the external nucleophile.
A classical example is of a sulfide displacing a halide, with subsequent opening of the reactive 3-membered intermediate:
Source: Organic Chemistry. Clayden/Warren.