It's the internet, like Einstein said: Sanity is relative.
My co-workers will insist that Sanity is no relative of mine.
Anyway, the difference between a city and a town is somewhat vague, since a "town" is a poorly defined term, but "city" conveys a sense of urbanization, a high population density, and all of the features and importance that can be attached to a major population center. In some US states, there are actual definitions as to what constitutes a "town", a "village", a "hamlet", or a "city", but it's not consistent from state to state, and most have no standards.
A few of what have been labelled as "cities" in the in-game literature have turned out to be nothing more than the crumbling ruins of a fort, with no trace of any "city". A few of the other "notable" cities or towns have turned out in subsequent games to be a "hamlet" (populaton of 200 or less, by one definition) at best, with 2 or 3 houses, and Inn, and not much else. In fact, the IC in Oblivion wasn't much above the population of a hamlet, but in really nicely finished stone buildings....now THAT's a disappointment!