Blazing ahead - City placement

So, I haven't written anything for a little while. I've been busy. With other pressing matters, kids with the flu, but also with working on my project. I've experimented with several different themes, which except the base geography, creates very different effects. The outcomes are totally unique. I can like that! It means that some of the things that I set out to do are actually coming together. The greatest challenge in many regards is actually finding decent seamless textures! I'm no artist (which is part of the reason I started this project in the first place), so my own sorry attempts don't cut it.

After this "multi theme prototyping phase", I want to take a step back, focus on one theme, and create every map layer for that one theme. The next challenge is... drumroll

City placement

Cities and towns will be a layer of the map that you can choose whether to generate or not. I understand that not everyone will find automatically generated cities useful, - but I would, and as such, I'm doing it!

I'm currently in a phase where I'm trying to come up with a decent algorithm for finding suitable places for cities. I'm probably going to base it on the algorithm that finds river locations, with some modifications of course.

But I need your help.

What describes a good city location? Where are cities normally located? Cities might have different size, - can we generally say the likelyhood that a large city will form in a specific location? Or a small town? What should be the minimum distance between two cities, as a general rule?

These are questions I need help with finding the answers to, to create an algorithm that produces city locations that are believable. Take into account that the maps will seldomly be 21st century maps. Fantasy maps are most often of the  medieval sort, although they don't necessarily have to be.

Update

I want to consolidate some of the major points written in the comments here. I am going to group the points made, into two groups:

• Geographic
• Sociological / Demographic 

In the Geographic group lies the most obvious and visible requirements.

• "Near water" - probably the easiest requirement to check for. At a river mouth, a river fork, a bay, or a coastal point. 
• "Mountain pass" - most likely not the largest cities, but strategically placed ones. Most likely very secure. 

In the Socialogical / Demographic group lies more indirect requirements that may have a large impact on the bigger picture.

• "Trade routes" - smaller towns may form naturally along major city trade routes, especially if the area is lush and abundant with food.
• "Cultural centers" - Harder to implement as an initial requirement, it could be interesting to attempt to plot major cities first, then perform a second algorithm, using the large cities as cultural centers, to sea how lesser cities and trading routes form in their vincinity. Implementing this is quite some way down the road though.

There are more things to consider, but unless someone suggests specific ways to put them into an algorithm, I think I have more than enough to start with. Excited!