Diablo II will contain four different towns, each with its own unique environment, appearance, content, and population. There will be one town for each act, and they'll be much larger than Tristram was in Diablo 1.
Virtually all aspects of the towns have been improved upon: NPC's, both important and peripheral, walk the streets and move around their shops; you character can enter and explore buildings and structures; and the random level generator assures that the buildings won't always be in the same place every game.
Unlike Diablo 1, there will be monsters teeming in the wilderness just outside of town. Though the towns themselves will be safe havens to park your character if for some reason you want to leave Diablo II for a few minutes. Of course towns will also provide essential services, such as NPC-run shops where you can buy or sell items, or even get cured of poison.
In a town will also be the best place to chat or trade items with other players, and most interaction with NPC's related to the many quests throughout Diablo II will take place within the friendly confines of the city walls.