Decide How Big The Settlement Is
This is simple and basically based on population. You should already have an idea how populated the area is, how big the biggest cities are and how many smaller settlements are around. You are working with a fantasy setting, so don't think logically. In some areas there might be tens of huge cities but some outbacks are more rural than conquered.
Remember also, that the settlements are not there to serve characters. They have a purpose of their own.
System To Create Settlements
These are example settlements. The bigger the settlement is more there are important services. Roll dice based on settlements to see how many important services and noteworthy factions there are. You might want to use Vornheim for details, but can also decide these details yourself.
For example a village has 1d4 important services and 1d2 noteworthy factions. 1d4 result of 2 and I decide there's a hunter who only doesn't sell some meat and fur (at high price, +25% normal) and arrows (+50% price). Also a small and lousy inn is present, but at least it's affortable. 1d2 noteworthy factions result 1 tells, that there's a priest (Cleric lvl 1).
For services, npc's and quick city layouts (and much more) there are easy tools in Vornheim Kit. You can also use your fantasy city generation of choice here if you don't want to decide everything by yourself.
- Isolated dwellling - Only few buildings with families. Probably farmers. No resources to buy, maybe only cheap bed and meal.
- Hamlet - Tiny population of people around 50 to 100 and few buildings. Only very few (if any) services. Important services 1d3-1, Noteworthy faction 1d3-1.
- Village - Villages generally don't have many services. A village has a population of 100-500. Important services 1d4, Noteworthy factions 1d2.
- Town - Towns have better general services and population of 500-1000. Important services d4+2, Noteworthy factions 1d3.
- Large town - Large towns have good resources and more variety in services. Also more factions are present. Population of a large town is 1000-2500. Important services 2d6+2, Noteworthy factions 2d4.
- City - Cities are big and organized usually heavily walled and well guarded. From cities high status person(s) or factions rule the areas of before mentioned settlements. Population of a city is 2500-5000. Important services 4d6+4, Noteworthy factions 3d4.
- Large city - Large cities are well known and big melting pots of services, cultures, passerby's, trading and also slums. Large cities are important in realms and there are not many of those, possibly only one of a kind. Population is 5000-10000. Important services 4d6+10, Noteworthy factions 2d8+4.
- Metropolis - Only few metrololises are known to exist. Those are few and crowded and literally almost anything can be found within. Usually factions rule their own districts and districts within a metropolis feel and look like their own cities in culture, style and customs. Population is 10000+ but usually unknown. Important services 1d4 per a block, 2d6 in a neighborhood, 4d6+10 in a sub-city, Noteworthy factions 3d4 in a sub-city.
Help from Wikipedia: http://en.wikipedia.org/wiki/Settlement_hierarchy
Girgush's Hole (isolated settlement). Two houses next to a mountain. They have small field to feed the five workers who dig coal from the mines. Once per week they deliver coal to a trading crossroads. They are very suspicious for the strangers but warm and fun company in late evening if the trust is gained.
Three Trees (hamlet). The hamlet has its name from three big oaks in the middle of the housings. They farm their food and have few heads of livestock. There are no services available, but adventures can rest their head in barn. There is a village chief, but he is not actively trying to lead the hamlet. He just monitors that everything is all right.
Mornonger (village). Mornonger is a small fishing village with some traffic but it is not near any important trading routes or in a good place for a successful harbor activity. Most of the food they fish they eat and the rest they trade. There is a small inn with extraordinary seafood dishes, small workshop what crafts everything needed from nets to woodcrafts and a high guard tower where they keep homing pigeons. The villagers are well known fishermen among the people who are aware of them and they get better price of fish than usually.
Skalvirg (town). Isolated northern town what has grown when people from surrounding settlements have slowly moved together to form a place where survival is easier. They have inn with great variety of beers, skillful craftsmen (4 professions) and barracks with a good stock of weapons. The warriors are well known (25% of the population) and sometimes do high quality mercenary jobs. Their leader Skalk the Bald is a retired warrior who is rumored to have killed a giant all by himself.
Anterloin (city). Anterloin is a big city in desert. It is exotic place to travel and many seek experiences there. Slavery is common and the city is well known for their high quality slaves. There are many services available (12) including a spa build over a small oasis, weaponsmith creating excelent weapons of strange minerals (+250% price, +1 weapons) dug from the stones outside the city, and a gladiator arena where all fights are performed bare handed. There are 12 factions. Slavers' guild, priests of the sun god, guild of the dead (mummifiers), Thieves of the sand guild, prince Halmahar and his court only few to mention.
Droggolyr (large city) is the capital of dwarven mountains dug deep over the aeons. Some say that it was a creation of dwarven god expanded by generations. It is also told that from Droggolyr you can enter any dwarven settlement via tunnels. Only dwarves can enter freely and others are treated suspiciously. There are several services to support the city and main factions are from the total 17: The Stonediggers, Craftsmen of the Silver, Trollslayers, Priests of the Stone, Dwarven Trader's Guild, Explorers of the Dungeon, Highbeard the King.
Metropolis? That would be its own post!