Medieval villages grew into towns because of the growth of:

1. religion
2. government
3. trade
4. education

Medieval villages grew into towns because of the growth of Religion. Medieval peasants were attracted by religious centers which led to the growth of small villages into towns. With the continuous growth of population, these towns have grown into places or landmarks where people could easily meet. 

As the development grew through time, the supply for water was mostly needed by these towns, that is why most of them were built along rivers. Aside from a water supply, the rivers also played a big role in the disposal of sewage.