The Capital is the town you start with, when you set up an account.
The Capital receives certain effects that make it the most powerful town of your empire:
Happiness and Housing space
There is two major effects to your capital. After you research Well Digging ( Science ), the town in which you palace stands (this is automatically your capital) receives a +50 happiness and +50 housing space bonus. Furthermore, after you research Utopia ( Economy ), its +200 happiness and housing space bonuses will apply only to your Capital.
In order to create more colonies, you need to upgrade your Palace in your Capital. The Palace can only be found there, all of the other colonies have a Governor's Residence. Also, there is no corruption in your capital. Therefore, the citizens in the capital always work diligently to produce building material and luxury goods.
You can occupy as many towns as the level of the Palace in your Capital. Also, the island where your capital stands has a Barbarian Village on it, which you can pillage. A new player can loot valuable resources and also learn about the battle system by constantly pillaging it.
Moving your Capital
You cannot change the position of your Capital, until you have built a second town or your first colony. To build a second colony, you have to upgrade your Palace in your capital. As soon as you upgrade a Governor's residence to a palace on a second town, it will destroy the first Palace and the new colony with the Palace is now your Capital. The Capital's Palace will be completely destroyed and a Governor's residence will have to be built in place of the Palace, in order to remove the corruption that will follow.