A settlement hierarchy is a way of describing settlements. A hierarchy describes a settlement by its population. An isolated building being at the bottom and a conurbation being at the top with the highest amount of people. The higher up the pyramid that you go the more people in that type of settlement, but there are fewer instances of such settlements. Typically, the geographic size also increases the higher up the pyramid that you go. Also, the higher up the pyramid you go the more services that the settlement will have.

Capital city - only one capital in a country and may have a high population.

Conurbation – a capital or super city which has many towns in it. The population would be several millions. A conurbation is an urban area comprising a number of cities, towns and villages which, through population growth and expansion, have physically merged to form one continuous built up area. ...

Large City – a large city with many services. Would have over 1 million people in it.

City – a city would have some services but not as much as a large city. The population would be over 100,000 people. Look up city, City in Wiktionary, the free dictionary. ...

Large town – a large town would have a population of 20,000 up to 100,000

Town – a town would have a population of 1,000 up to 20,000 Ronda, Spain Main street in Bastrop, Texas, a small town A town is a community of people ranging from a few hundred to several thousands, although it may be applied loosely even to huge metropolitan areas. ...

Village – a village would not have many services. It may only have a small corner shop or post office. A village would have fewer than 1,000 people in it. Masouleh village, Gilan Province, Iran. ...

Hamlet – a hamlet would have around 100 people in it and not many houses. It would only have a public call box for its services. A hamlet is (usually — see below) a small settlement, too small or unimportant to be considered a village. ...

Isolated dwelling – an isolated dwelling would only have 1 or 2 houses or families in it. It would have no services.

Settlement hierarchy can also depend on the sphere of influnce. This is how far people will travel to use the services in the settlement, if people travel further the town becomes more important and ranks higher in settlement hierarchy.