From Arcanum Illyria
Cities are the basic building block of a player's account. Each player starts with one, and anything a player can produce, send, or do starts from within an owned city. Each one takes a very long time to build, and at present it is only possible for players to have 10 cities in a single account. Many will choose to stop at 9 or even 8 due to the progressively more difficult population requirements for establishing additional cities.
Building up a city primarily consists of constructing resource structures and other buildings, and researching new technologies. But there are far more types of buildings than available locations to build them, and different buildings require differing levels of resource upkeep. As a result, players will want to choose carefully what they build, and eventually steer different cities toward specialized purposes.
As cities grow larger and gain more functionality, they can also start claiming Sovereign Land by which to expand their influence and enhance their capabilities such as unit and resource production.
See also: Sovereignty (system)
Requirements for Settling New Cities
Settling your nth city requires that you dispatch (n-1) settlers in a single mission, which means having that many settlers at a single city. Players are advised to be sure they keep up with settler production until they have their first few cities, since settlers take so long to build and can delay progress substantially if forgotten. Mainly, however, certain amounts of population must be achieved before players will be allowed to settle their next city.
Note: settling an 11th city requires 515,000 population, which is currently unachievable.