Population is what helps your entire kingdom to exist. They prodce gold for you each turn by paying their taxes. They eat food and also produce it when Farms are available at your kingdom. The amount of food they produce depends from the population amount, the number of farms and the racial mod of your kingdom. When one hires troops and labs/scholars they come from the population; also, you may dismiss them back to pop. Some racial specials depend on the amount of your population as well.