The Implied Setting of AD&D Towns & Cities: Four Themes

This is a topic I've been dancing around a lot for the past few months. As my observations have accumulated, I've begun to feel that it would be beneficial to collate my findings into a broader "master post" which paints a more comprehensive picture of the subject. To summarize my findings so far (more or less sorted beginning with broad ideas down to specific details):

• Player characters are assumed to be strangers to the land in which they adventure, including the local town or city, and will have to learn the lay of the land when they first begin their careers. Even things as simple as entering through the gate and finding lodging, a place to buy equipment, and where to meet fellow adventurers is intended to be a challenge.
• Towns and cities are home to high-level NPCs. They represent the established order, and view player character adventurers as a threat to that order. While they generally have no interest in adventuring themselves (allowing the player characters to rightfully be the main agents of change of the campaign), they are more than happy to use the player characters as pawns, both to accomplish their own ends as well as to remove these threats to some distant border region where they will pose less of a danger and hopefully build their own domain well removed from the NPCs'.
• NPCs are expensive and irritating to deal with, and because of the high density of NPCs in towns and cities, adventures in these places will as a result be particularly expensive and irritating. While towns and cities offer many amenities and services to the player characters, actually obtaining these is a challenge of the player characters' wealth and the players' patience.
• Encounters in AD&D towns and cities are intended to be disguised "using vagueness and similarity". The players are meant to never be quite sure who or what exactly they're encountering. While many encountered people and creatures will be indifferent to the party, many others will be actively seeking to prey upon them (using their mistaken identity to their advantage), or more than ready to throw a fit if they're offended or mistreated (likely because their identity is mistaken).
• AD&D towns and cities are supported by a robust system of duties, excises, fees, tariffs, taxes, tithes, and tolls - including tolls to use roads to dungeons. Towns and cities do not exist solely to house and support the player characters but also to lord over them and drain their resources. If the player characters conspire to dodge these annoying inconveniences, they might pay for it by way of the usual complications involved in engaging in criminal activity or by becoming indentured servants to the city guard or watch.
• Towns and cities are the best place to find henchmen and hirelings. 1 to 2% of NPCs are "suitable for level advancement", and of those, only 10% are looking for work as henchmen. Recruiting them takes time and - like other interactions with NPCs - is likely to be costly and frustrating. There's a cottage industry of criers, tavernkeepers, and printers who make substantial amounts of money on the side helping adventurers advertise to prospective henchmen. It's also suggested that there is a complex web of social taboos and expectations when recruiting henchmen, which may apply more broadly to interacting with other NPCs in towns and cities - alignment and religion are touchy subjects, and speaking the language of alignment is a social faux pas, reinforcing that in these environments the player characters should never know exactly who they are dealing with.
• Larger towns and cities will usually have a market for subdued dragons as well as other enslaved monsters, their eggs, young, hides, and other parts - that is, there exists in AD&D towns and cities an adventurer-fueled "monster economy" of sorts. Occasionally, adventurers (player characters or otherwise) will pull a subdued dragon, a train of giant beavers, a cartload of pegasus eggs, or a barrel full of mind flayer brains into town to sell, which is probably an occasion worth noting. If followed to its logical conclusion, this presupposes that wealthy and/or high-level NPCs will own pet dragons, griffons, and the like, and be decorated with the pelts of giant otters and winter wolves.
• Cities are infested with disease, which proliferates due to crowding, filth, and plague-bearing beggars and rats. These diseases can be quite lethal, and because curing them is relatively expensive and difficult at low levels, these characters would be wise to spend as little time in cities as possible.
• Most towns and cities will be home to both a Thieves Guild and an Assassins Guild. Thief and assassin player characters will need to choose whether to join them or supplant them. Even in the absence of such player characters, there will likely be conflict between these entities and their upstart rivals, generating conflict which the player characters can choose to avoid or become embroiled in.

To these points I'll add a few others before concluding. From the PHB, in the section titled MONEY, AD&D cities and towns are analogous to gold rush boom towns:

This not only justifies why equipment prices are so high compared to what might be "historically" accurate (I'm to understand that some people are concerned about this), but also lends additional character to the town or city. Towns and cities are vital places to adventurers due to the availability of goods and services, but they are also money sinks where opportunistic merchants and service providers will test them to see just how much they're willing to spend for what they need. Also, D&D is a Western.

From the PHB section titled THE ADVENTURE:

Town adventures are described as "interesting, informative, and often hazardous", requiring "forethought and skill". "Care must be taken in all one says and does" and in these environments one can find "many potential helpful or useful characters" as well as "clever and dangerous adversaries".

Later, in the section titled SUCCESSFUL ADVENTURES, we are told that, compared to underworld and wilderness adventures, "City adventures are the toughest of all":

Like underworld and wilderness adventures, successful adventures in the city depend on "Setting out with an objective in mind, having sufficient force to gain it, and not drawing undue attention to the party." Why then are city adventures "the toughest of all"? 

Probably it is some combination of the aforementioned high-level NPCs and powerful factions, hidden dangers, meddling officials, social landmines, and the overall size and complexity of the place. Crawling through a dungeon filled with monsters and traps is one thing, and assaulting a wilderness monster lair or stronghold is another - engaging in a protracted war with the Thieves Guild in the city streets is an order of magnitude more complex because of the many different characters and factions in proximity to the scenario, each of which will have their own goals and opinions about the matter and will intervene or otherwise react in ways befitting their personalities.

I would be remiss not to mention that in addition to criminals, officials, character-type NPCs, and other mundanities of municipal life like laborers, merchants, and rats, the city/town encounter table is also filled with demons, devils, dopplegangers, lycanthropes, and undead:

The town or city is home to Evil temples guarded by devils, wizards who conjure demons, deserted places, entrances to the underworld, and ruins where dopplegangers and shadows lurk, haunted charnel houses and graveyards, and shapeshifting beasts and vampires almost always in search of victims.

Each of these points reinforces one or more common themes in the portrayal of AD&D's towns and cities:

• They are fantastic places - maybe not as mythic as the dungeon, but nonetheless inhabited by the game's highest-level NPCs and warring guilds, and the sites of the occasional market day featuring the sale of everything from exotic monster pelts and eggs to live dragons. Conjured demons and devils, haunted graveyards, deserted ruins, predatory shapeshifters, and entrances to the underworld are common.
• They are also mundane places, where player characters are subject to real-world annoyances like overbearing taxes and other drains on their wealth, meddling officials, easily-offended nobles and merchants, beggars, drunks, rowdy laborers, and common diseases.
• They are useful places. Player characters can rely on them for common services and resources such as lodging, equipment, meeting with fellow adventurers, selling treasure, and recruiting henchmen. Due to the presence of the aforementioned high-level NPCs and the monster economy, they are also places where player characters can procure powerful spellcasting services and purchase rare ingredients needed to ink scrolls, brew potions, and craft other magic items.
• They are adversarial places. They are strange to the player characters, and will require some investigation to become familiar with. The player characters are viewed as troublemakers at best and threats at worst, and NPCs will require significant persuading before offering aid to them. These environments are social mine fields and money pits, with powerful authority figures and hidden dangers eager to exploit the player characters, do harm to them, or otherwise embroil them in trouble.

These themes help to lend a unique character to these environments which the DM can keep in mind when running scenarios therein. They also suggest that, like dungeons and wilderness environments, towns and cities serve a dual purpose when it comes to gameplay. 

Dungeons are dangerous places, but they're also a reliable source of treasure in a somewhat "balanced" gameplay environment suitable for lower-level characters. The wilderness is often even more dangerous and unpredictable, but the treasure hoards possessed by monsters there are often much greater in value, and the environment provides ample room for characters to establish and carve out their own domains around which higher levels of play are centered. Towns and cities are essential to characters because of the goods and services they offer, but rather than being purely beacons of safety, they are perhaps the most dangerous, complex places in which gameplay takes place.

In AD&D, no environment exists solely to benefit or serve the player characters. Nowhere is without peril or challenge - and towns and cities are no exception.