To capture a village, first command your squads to set it on fire, then occupy it to take it over (both actions are reflected by the status bar above the village's main building). Villages can have four levels of defense: no defense, brown, silver and gold - all reflected by the outline of village's status bar. The higher the defense, the more troops are needed to take it over, and more soldiers might die while they capture the village. Take notice, that capturing stops upon enemy soldiers entering the village.