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You can buy food from the villagers or force them to give you goods; forcing them to give you goods will lower their reputation towards you (buying the goods from them will not affect their opinion of you). The reputation only lowers when you actually enter the loot screen, so if you accidentally choose the wrong option you can pick "Forget it" and avoid the reputation penalty.
Unless the villagers dislike you (see Reputation), you can recruit peasants to your army, either with the "Recruit volunteers" option or by talking to the Village Elder; unlike the villages your faction owned from the beginning, captured villages will offer you Recruits of whatever faction the village originally belonged to. Each recruit requires a small joining fee. The higher your reputation, the more recruits you will receive. If you have low Renown or a village is very poor the recruitment options will function but you will be told no-one was willing to join you.
Unlike towns and castles, villages cannot hold a garrison. If the village is attacked, only the Farmers are there to defend it. Building a watchtower (see improvements) will lengthen the time it takes for a village to fall, thus allowing you to come to their rescue.
From time to time enemies will try to raid your villages or besiege your castles; when this occurs you can head there and drive off the attackers. If it's a village being raided the Farmers will fight alongside you. If you do not deal with the attackers the village's prosperity will be significantly affected.
In the village you will find a Village Elder (he is the only villager who is stationary). From time to time he will offer village quests. Completing these will make the village like you more and will also improve its prosperity. Village prosperity has some amount of variation, so you may have to do quests now and then to keep its prosperity high.
Another factor of village prosperity is that villagers travelling to or from a town in order to trade need to reach their destination safely. Their parties are small and weak, so enemy parties are a real threat to them.
The "Manage this village" menu option lets you build several improvements to enhance your village's prosperity or productiveness. Note that these improvements are not visible when walking around the village; you need to use the management menu to see what improvements have been built. The cost and construction time will be decreased if you or your Engineer.