(A) is the Anglo-Saxon tún, a plot of ground fenced round or enclosed by a hedge; a single dwelling; a number of dwelling-houses enclosed together forming a village or burgh.
“Our ancestors in time of war ... would cast a ditch, or make a strong hedge about their houses, and houses so environed ... got the name tunes annexed into them (as Cote-tun, now Cotton, the cote or house fenced in or tuned about; North-tun, now Norton ... South-tun, now Sutton). In troublous times whole `thorpes' were fenced in, and took the name of tunes (towns) and then `stedes' (now cities), and `thorpes' (villages), and burghs (burrows) got the name of townes.” —Restitution, p. 232.
Source: Dictionary of Phrase and Fable, E. Cobham Brewer, 1894
More on Town from Fact Monster: