A Settler Unit allows you to create new towns in your civilization. It is created at the Barracks, for a fee of 25,000 coins.
When the settler has finished crafting, it will appears as an iron door in the deposit chest. You must give the item to a player that is not currently a Mayor in any town. Once you travel to where you would like to create a new town (at least 160 blocks away from any other town, and not in the culture borders of any other town) you can create a new town by holding the iron door in the right-most action-bar slot and right clicking.
While the settlement does not need to be in your culture borders, or anywhere near your current towns, there is an extremely heavy unhappiness* burden based on distance. The code for this is not currently known, but from initial testing, a town at the minimum 160 block distance will generate an uphappiness* of 1 point, and unhappiness* will increase as you travel further.