We currently do not have the option to select which town you live in, move, or switch towns; but we hope to add that in the future.
When you encounter players on the trail, those are AI versions of real accounts. These AI versions of players show up in the last place they logged out. For example: if you logged out in Turkey Ridge right now and you have a friend that goes to Turkey Ridge shortly after, your friend may see your character running around although it's not actually you.
The live interactions you have with players happen in your town with shared resources and buildings. If you are chatting in the saloon, that's with live players. If you're filling warehouse crates, picking up shared resources from machines, etc.; those are interactions with live players.
Unfortunately, this also means that you are currently unable to play with specific friends while out on the trail.