During the years-long winters which hit the region, the smallfolk of the North came to huddle in settlements outside the walls of Winterfell for protection. Over time they built these up into permanent structures and over the centuries it grew into a more established town, though its population still swells during winter and declines during spring and summer.
Tyrion Lannister sneaks off from the main royal caravan of King Robert Baratheon, which was headed to Winterfell itself, to visit the local brothel in the winter town, where he has sex with the prostitute named Ros. Jaime Lannister arrives to fetch him back to come to the feast the Starks are holding at Winterfell later that night.
Bran Stark gives two orphans of the winter town, Jack and Billy, to a shepherd asking for asistance in defending his flock from wolves. The two orphans are later killed by Theon Greyjoy and his men to cover the escape of Bran and Rickon Stark.
In the books
In the A Song of Ice and Fire the winter town is formed by rows of small and neat houses built of log and undressed stone. Located at Winterfell's main gatehouse, the market square has wooden stalls for produce and goods and a well at its center. The local alehouse is the Smoking Log. The Kingsroad lies past the sprawl of castle and town, while the Wolfswood is two miles away. Hunting parties from Winterfell can avoid the winter town by taking the Hunter's Gate instead of the main gate.
Its streets are muddy during summer, when four fifths of the homes are left empty. During wintertime, however, the winter town becomes filled with northmen from throughout the region, such as clansmen from the northern mountains. Some townfolk claim that Winterfell is warmed by a dragon which sleeps below the castle - really the castle was built over a series of natural hot springs.
The World of Ice and Fire sourcebook (2014) specifies that - other than White Harbor, the only city in the North and a small one at that - the winter town is one of only two settlements in all of the North which are big enough to be called actual "market-towns". The other town is Barrowton to the southwest.
In the novels, the Winter town is burned by the men of House Bolton when they betray the Northmen led by Ser Rodrik Cassel during the attempt to liberate Winterfell from the House Greyjoy occupation led by Theon Greyjoy, as part of the Sack of Winterfell. Despite the approach of winter the Boltons have made no attempt to rebuild it for other refugees, and the ruins of the winter town become buried under heavy snows.
Bear Island · Last Hearth · Karhold · The Dreadfort · Winterfell (Winter town) · Deepwood Motte · Torrhen's Square · Castle Cerwyn · Hornwood · Ramsgate · Widow's Watch · Barrowton · White Harbor · Oldcastle · Moat Cailin · Flint's Finger · Greywater Watch · Rillwater Crossing · Ironrath · Highpoint
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