The game is in a post apocalyptic world and most of the ground is not suitable for placing a city to have a populous to suvive.
The game doesn't tell you that you must settle in this spot, usually there are several spots to choose from and depending on the map you can have a lot of choices. In fact you can have rather large sections of choices for a city. But you also can't have cities too close to each other needs to be at least 6 tiles apart. So you can find a large spot to settle. There is good settling in the middle that will get rid of all other options. But you could choose to have 2 cities with sub-optimal locations.
It is nothing that I think is bad in this game and I actually prefer this system than the ability to place a city anywhere I like even if it makes no sense that a city should be able to survive in that location.
There is also the possiblity of changing things so you could settle everywhere you like, but you would have bonuses like 2 grain and 2 production and the only spots that show up have a bonus sum of 6, everything else doesn't show up unless it meets this threshold number.