In Chronicles of Elyria settlements can be divided into two main groups. Baronies and settlements. Baronies are based around a stronghold, keep or castle, and have a strong martial focus. They are in most cases funded by the duke and are in charge of defending the earldom. Settlements on the other hand are focusing on everything else and can take the form of small hamlets, villages, towns or cities. They may focus on farming, trading, crafting, research and much more. While the baronies are run by barons, towns are run by a major who’s elected among its populace.
You can read more about the game mechanics on the offical Chronicles of Elyria website: