I believe that is a reference to city size, which has remained since before specialisation (L1=Outpost, L2=Village, L3=Town, ...)
Now that we have specialised cities, and outposts are more meaningful, this is pretty confusing. Perhaps just put the city type in there (maybe keep "Village" for unspecialised L1 cities?), and at the same time solve the difficulty of discovering the city type. Currently you have to look at the list constructed city improvements to find that information.
