Eurostat Glossary: Degree_of_urbanisation
the degree of urbanisation classifies local administrative units (LAUs) as cities, towns and suburbs or rural areas based on a combination of geographical contiguity and population density, measured by minimum population thresholds applied to 1 km² population grid cells; each LAU belongs exclusively to one of these three classes.
The categories are defined as follows:
cities, otherwise referred to as densely populated areas — code 1;
towns and suburbs, otherwise referred to as intermediate density areas — code 2;
rural areas, otherwise referred to as thinly populated areas — code 3.
Urban areas refers to an aggregate composed of information covering cities as well as towns and suburbs (in other words, densely populated areas and intermediate density areas).