Windhill is a small, rural village in the Knightingale Kingdom, and it’s the first town Yono visits on his journeys. The whole village is entirely powered by wind energy, with various windmills and propellers all over the place. The villagers lead simple lives, generally unaffiliated by various conflicts and political upheaval in the rest of the kingdom. Windhill is populated primarily by Humans, but some Mekani merchants are traveling through, and there is a mysterious Undertaker living there who is definitely not human.
I think of this game world as divided into three broad categories: Town, Overworld and Dungeon. The Overworld consists mainly of forest and tunnels, and can have some enemies and traps and treasures. The Dungeons are similar, but they have their own themes and music, as well as their own respawn points, and they generally have something to do with the overaching story, whereas the Overworld is mostly about transportation.
The Towns, at last, have (almost) no enemies or traps, but are instead populated by friendly npc:s and vendors. This is where you handle your resources, trade in treasures you have found, and also help the townsfolk with small quests that they have.
What I am trying to get across, though, is that these are not thee separate types of gameplay. They are more like themes in the level design, where the towns focus more on dialogs and upgrades, and the Overworld and Dungeons have more monsters and traps.