Density describes the type of building that is allowed to be constructed on a given lot. Higher density lots allow for the construction of larger buildings such as apartments and office buildings, while lower density lots will allow for smaller structures such as houses and small shops.
There are 3 densities: Low, Medium and High.You get medium density at around 1,000 people, & High density after 25,000 Sims. High density is what the SimCity series is all about. All buildings from Medium density up require a water system.
Low density zones allow for smaller houses to be constructed, such as cottages and mansions. Low density buildings usually support a small number of people, ranging from 5-13 inhabitants. Medium density buildings usually support around 31-300, and these can range from 3-storey apartment buildings and low-rises to smaller condos & high wealth versions of the same kind of building. High density buildings can only grow on high density zones, and they can house thousands of sims at full capacity. Examples include tenements and other high-rise condos.
Low density commercial zones allow for the construction of small shops and car service shops to boutiques & banks. Medium density larger shops and offices, including insurance companies, design teams, and other major smaller corporations. They usually house 50-200 jobs. High density zoning allow for the largest buildings to be constructed, if the circumstances are appropriate. Skyscrapers and other high-rise businesses usually occupy these zones.
Agriculture is the lowest available density. Its farms' job capacity ranges from 2-20. Medium density is the smallest zone for constructing actual factories. Their capacity goes from 5 to about 40. Examples are Farley's Foundry (dirty industry), Bella's Barium (manufacturing industry), or Havoc Bioenhancements (high tech industry).
High density industrial development covers the 30-80 range in capacity and usually house buildings that contain the most jobs. Examples may include Broquard's Cement Plant (dirty), Patch's Paint gun (manufacturing), and Jenquai Alchemy (high tech).