From the website:
The sentence sounds like it describes two seperate settlement types. Maybe there will be two types of provinces. One with towns and very small provinces with castles in.New Settlement Types
Build through six levels of settlement ranging from humble villages to vast cities and wooden forts to mighty stone fortress. Develop your faction as a feudal aristocracy using you castles to keep the peasants in check whilst conquering your enemies with your powerful armies. Or build cities to develop a wealthy urban society, and battle your foes with diplomacy, bribery, assassination and armies of mercenaries.
But the next two sentences sound like you have an option castle or city, a bit like temples in RTW. This sound more likely.
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