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Citizens can have different levels:
On each level the citizens have more needs.
|Citizen Level||Level-specific needs||Prerequisite|
|Serf||Bread or Fish||Living in a level 2 House|
|Citizen||Clothes||Living in a level 3 House|
Villagers are following a cycle, the cycle can varies.
Make sure you optimize the distance between the different places the villagers need to visit
Home - Berries - Church - Home - Work - Work - Water and Home again.
Home - Work - Work - Home - Berries - Fish or Bread - Cloth - Honey - Home - Work - Work - Water - Church and Home again
Villagers will get resources from their corresponding buildings:
Food: from the "Food Stall"
Clothes: from the "Goods Stall"
Water: From the "Well"
Faith: From the Church
Villagers need access to these buildings with resources in them to keep up their happiness. They also need access to homes, just place some Residential zones down and builders will take care of building the homes. Keep in mind where you place the zones as they should be close the your villagers needs. Finally your Villagers will need a job. Optimally you should assign them to somewhere close to their homes. But if your Villagers have all 3 of these needs they will be happy!
If their happiness is too low you will have a "mass exodus" of Villagers. The higher the overall happiness the more Villagers will want to come to your awesome city.
When building your cool medieval town, you will need to manage how many people are coming into your city, as more people will need more resources and if you can't keep up the over all happiness will go down.
The more happiness you have the more often you will get more Villagers. This might not be a good thing as if you are in a stable phase where you are not growing very fast then adding more Villagers might do more harm than good. So if you go to the "Village Information Window" (Top Left of the Screen) you can un-tick the Immigration box and you will stop the influx of new Villagers until you are ready to receive more.