From The Heroes of Might and Magic III wiki

A place to produce Gold and your army. If there is a Mage Guild your hero can learn spells and regenerate spell points.

Towns are where everything is made. You build buildings in towns, and there are 8 different town types, 9 with the Armageddon's Blade expansion. They are:

[edit] Towns

• Castle
• Dungeon
• Fortress
• Inferno
• Necropolis
• Rampart
• Stronghold
• Tower
• Conflux -- Note: Is only in the Armageddon's Blade expansion.

Maximum number is 48 towns on any map.