Fiefs, Castles and Cities
Upon joining a faction, you would be offered a fief. By definition, a fief is a piece of land granted by the king to one of his nobles, and resembles a village in the case of M&B. Your fief generates tax revenue for you, and also provides you with the opportunities to upgrade it's windmills, irrigation and housing. Housing seems to increase the number of peasants that defend your village when it's being attacked and also seems to slightly increase the number of volunteers joining you, irrigation seems to help increase taxes, while windmills seem to help with producing supplies that you can buy or take from the villagers.
Your fief can be looted by an opposing faction's party, in which case you would not be able to receive taxes or recruit volunteers from that fief for several game days until it recovers. This applies for the enemy fiefs that you loot just the same.
Once you have joined a faction and conquered a few castles, you may be granted one of the castles as an additional fief. You cannot siege enemy castles unless you have joined a faction, and once conquered, you cannot claim it for yourself (and therefore you cannot station troops there) straight away. At this point of time, you cannot upgrade or "manage" your castles, however you can store prisoners and additional troops there. You could also expect to be able to upgrade them in the future as well as possibly expect a few more features related to them.
Some of the castles, would also force the villages around them to convert to your side once conquered too, meaning your king would have more land to give away to his nobles - you being one of them.
At this point of time, you cannot siege actual capitol cities. or take over the entire faction altogether. Enemy heroes however can siege your capitols. You cannot join in the defence of these cities, however you can still intercept the parties attacking it.