Citizens are what make a town work. Without them, nothing can be built, and the town won't grow. They need to be cared for as they go about their lives. If they're happy and healthy, the population will increase as citizens find spouses, move into new homes, and have children and grandchildren.
The citizens have their own priorities as they go about their lives - they aren't mindless workers. Staying fed, staying warm, and being happy will make them work hard. Being sad, cold, or sick will cause citizens to idle, become depressed or become diseased. The relationship between home and families (Town Hall) can be affected to happiness, too.
Citizens will go home when they are hungry. They'll stop in at a neighbour's house to warm up in cold weather. When depressed, they will idle in places that make them happy rather than work. They will collect food and fuel from markets or storage barns to keep in their homes.
Citizens gain 5 years of age for every 1 year that passes in-game.