In the US city status makes an important practical difference to how an area is run and what the people running it can do independently of the State they're in. So it makes sense every settlement with a general store and a paved road would want that status.
The status of various municipal designations varies greatly based on state laws. Generally, government levels go state->county->municipality. The type and form of a municipality generally only affects how it is organized, not its level of independence from higher levels of government. Some states restrict types and forms based on size, though.
The person you are responding to never even used the word cities.