Settlements
Settlements are Player made Villages. To start one, craft a Settlement Flag and place it down. Settlers can be recruited to join your settlement at other villages, or when you run into them in the world.
For settlers to join, you need to build houses. Settlers will join if you meet their requirements, and your settlement has less then 2 homeless Settlers.
A house or room needs to be at least 20 tiles inside, a completed floor, and it must have a light source. Some settlers have a special requirement, like the Alchemist needs an Alchemist Table, and the Blacksmith needs an Anvil. It will say what they need when you try to move them into a house or room.
Settlers will have jobs in a settlement, which they perform around their house.
Farmer
The Farmer will farm Farmland around his house. Make a Farmland field close to the Farmer's house, and plant the seeds yourself. Once the seeds can be harvested, the Farmer will do this, and plant the same seed back on the tile.