Most people worked as farmers during the beginning of the Middle Ages because farming methods were inefficient and most of the population was needed to farm the land for food. As farming methods improved towards the beginning of the eleventh century, more people were able to leave their farms and earn their living by becoming craftsmen and traders. As these people came together to practice their trades, they formed the first towns.

The people in towns were free; they owed no service and obedience to a lord. Instead, the people paid a tax to the lords who owned the land on which the town stood. The town's government was led by a lord mayor and a council, who passed laws that were made public by a town crier with a bell. These mayors and councilmen were generally chosen from among the wealthiest of the craftsmen and traders and they zealously guarded the rights and privileges of their town against outsiders. Towns were almost always fortified with high stone walls that encircled the town and patrolled by guards in case the lord decided to go back on his agreement.

Inside the walls were a myriad of specialized industries such as weaving, leather working, bakers, and shoemaking, that provided many new jobs and many new goods. Merchants established new shops in the growing towns where there were many customers. Guards were needed to patrol the town walls and keep the peace, and musicians were needed to play at feasts and in civic processions. Bankers and lawyers arrived and set up thier shops, developing a new middle class. There was no room for town residents to grow food, so peasants from the countryside came to sell their produce in markets and buy the specialized goods of the town at least once a week. Sometimes serfs tried to hide in the towns. If they could stay for one year and one day without their lord finding them, the serf would become a freeman.

Townspeople lived in tall skinny houses that lined narrow, winding lanes. These houses were usually at least two floors. The bottom floor was a long skinny workroom where the owner displayed his goods and waited on customers. Subsequent floors housed the owner, his family, servants, and any apprentices he had. If a townsmen needed to add a room onto his house, he simply built on another floor. The windows in the house were covered by wooden shutters, although a few wealthy merchants had thick pieces of glass to keep out the elements. The houses were constructed of wood, or rough quartz and flint cemented together. Most houses were also painted. They were usually black, red, or blue, with paint made of pitch and linseed. Both the paint and the roof were highly flammable and the cry of "Fire!" sounded often, striking terror in listeners.

Towns helped to usher in new goods and new luxuries. They also helped to increase the quality of goods produced through regulation by trade guilds and ushered in the end of feudalism by providing people with options other than farming.

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