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Types of settlements clockwise from top left: village, single house, fortified village and kota camp.

The people of UnReal World can be found living in 4 kinds of settlements: Villages, fortified villages, kota camps, and single houses. The most common type outside the northern tribes, who live in kotas, is the village, which the Driikiläiset have often fortified. Some families or individuals (like the player character) have decided to live by themselves and their settlements are indicated on the wilderness map by a single house. In the (south-)eastern part of the map the settlements are inhabited by the hostile Njerpez slavers.

All villages have some sort of fresh water source, often a single water tile well. It is possible to use this for all one's hideworking needs, but using a well for tanning is akin to using it as a toilet so it is extremely rude.

The buildings in a settlement often have items lying on the ground, and it's possible to pick up and trade all such items with an adult inhabitant of the settlement. Often settlements even have storage buildings that work as shops. Some settlements also have domestic animals that can be traded for by asking any adult villager.

Whenever your character spots a previously unknown settlement while moving in the wilderness map, the game will give you a message and pause.

URW Game Encyclopedia description

The official URW in-game encyclopedia (accessed by the F1 key) describes single farms thusly:

Among the eastern peoples and western peoples the basic unit of settlement is a single farm. It has a main building and some additional buildings like store-houses, animal-shed and sauna. A small farm is run by a family, usually including grand-parents and maybe some unmarried brothers or sisters. Bigger farms might have a couple of servants.

The northern peoples don't have farms, but camps of families. At some regularly used camp-sites they might build small buildings, like sauna and store-houses, but otherwise they use portable tents called kota.

The official URW in-game encyclopedia (accessed by the F1 key) describes villages thusly:

A group of single farms is called a village. Northern tribes don't have proper villages at all. Kaumolaiset and Islanders also tend to live in rather isolated single farms. In the Driik one might find villages which are dense groups of four to five farms interconnected with roads. The rest of the cultures have somewhat looser villages.