When describing settled areas in D&D (and maybe fantasy RPGs and medieval settings in general), I often see terms like Hamlet, Thorp, Village, Town, and City thrown around without a clear distinction between them – and if Wikipedia is to be believed there is no clear dividing line.

So I came up with the following qualitative descriptions of settlements sizes, something that would hopefully allow players and DMs to look at a term and understand what that group of habitations is capable of doing easily or at all.

• Village (including Hamlets, Thorps) – communities too small to support significant specialized labor. To some degree all households have to participate directly in maintaining their own lives – farming, fishing, hunting, or animal husbandry (though the degree may vary between households), maintaining dwelling structures, making their own clothes, etc. Any specialized laborer (a priest or doctor) is likely to operate in that capacity part-time at best, unless they have some ability to outsource that labor (slaves, golems, etc.)
• Towns – Have significant specialization of labor and the consequent need for markets to exchange products and services, but does not have enough economic activity to sustain standing markets; as a result the town will generally have market days (depending on the economic status of the town these could be once per month, fortnight, or week, perhaps even twice a week – more often than that is more of a standing market). Market days may be associated with minor festivals or other occasions that bring people together, such as church days.
• Cities have enough sustained economic activity to require standing markets (markets that operate almost all the time and have stable locations). They have significant labor specialization and large enough concentrations of wealth that there will be noticeable expenditures on various types of overhead: infrastructure such as roads, bridges, aqueducts, and arguably even temples (in settings with active gods), as well as defenses such as standing armies and town guards, and fortified city walls (smaller settlements can have walls of course but the wealth of cities mean they almost certainly need them, and will tend to have better walls than any village). Because of their investment in military strength and infrastructure and the trade advantages of standing markets, cities will tend to be regional power centers – if they are surrounded by smaller settlements or control access to a vital resource (sea routes from a river, for example) they may even be power brokers.