Town and City are classification of places. Places of residences in terms of human settlements are often classified as cities, towns and villages. Cities are the largest of the three in terms of area and also have the densest population. Towns are larger than villages but smaller than cities. Difference between town and city is often a confusing one, and in different parts of the world, often the two terms are used interchangeably. There are different laws classifying a particular region as a town or a city in different countries and what may be a town in UK may classify as a city in the US and vice versa. In general however, a town is a residential area that is smaller than a city and also has a smaller population.

In America we never use the word village. There are no villages in the USA. That's kind of a hard question to give a precise answer too. There isn't an answer that you can just look up on this. In the USA, we usually only use town when we are talking about small retail areas in rural communities. In the country, the place where people would go to buy groceries, do some shopping, and go to the post office would be a town. Cities are densely populated locations. I wouldn't call anything a city unless the population was several thousand people. If you stick to calling built up, densely populated places cities and small retails areas in the countryside towns you will be correct 99% of the time. That works for America. In the UK, it's totally different.