In the game of Outremer, I separated Cities and Towns, and did not distinguish Villages. Villages in the Holy Land are extremely important, and extremely ancient. From Aqaba to Edessa, Villages are named with either their ancient Aramaic names, or with some version of them easy to pronounce in the locally important language. These places have been around forever, and may be quite large. Villages are usually the places farmers or fishermen live, and they work the areas nearby. Unlike in the USA, famers do not live in single family houses on the land they farm. In the desert areas, villages are not so much for farming as for trade. Villages grow up around caravanserais or fortifications, most of which are ancient and rebuilt again and again in the same spot, where there is a supply of water. For all the population in the great cities, the bulk of the people live in villages.
Towns and Cities in Outremer are both urbanized, that is they are inhabited by a variety of specialists, and not by a group of farmers or fishermen. They tend to be walled, though many have outgrown their walls since the times of constant danger. Many have several fortifications around them, castles and forts designed to protect them, and large and ornate places of worship. Both Towns and Cities in Outremer have usually existed for millennia in the same spot, though not always under the same name. Conquerors tend to rename Cities, and sometimes Towns, and forget about the villages.
The difference between Towns and Cities is therefore the population, and by extension the variety of services which are supported. Where a Town might support a thriving souk, or market, a City might support a dozen souks. Where a Town might have an imposing cathedral or beautiful mosque, a City might have dozens of each, with many of differing creeds, with synagogues and other places of worship thrown in for good measure. Cities thrive on trade, and on pilgrimage. The economic importance of pilgrimage to the Outremer cannot be overstated!
The roads shown on the maps in the game are all important primary or secondary trade routes. These routes have caravanserai roughly a day apart, or villages with accommodations, or both. The roads may be paved, or they may be dirt, but they are unmistakable as anything but roads. At borders along these routes there are customs shacks for taking fees, and barracks for troops. They are also regularly patrolled to drive away robbers and bandits.
There are also a huge number of tiny tertiary roads. These may be smugglers' routes, or herding paths, or just country lanes. There are no caravanserai, villages are insular and not equipped to take travellers, and no one patrols them or taxes their use. Use the roads appropriate to your purpose. Many of these roads were once more important than they are now, and lead to ruined places and cities, and which are now the haunt of bandits - and much worse. Use the road appropriate for your purpose.
Caravanserais are different in form and function in Cities and Towns from those in Villages. Damascus, for example, has many huge, gorgeous caravanserais, some of them architectural marvels, with shops and souks inside like modern shopping malls. Rural caravanserais are noted more for their utility and protection than their comfort and beauty, but they all are are stoutly built, and provide food and water.