For me personally, I do a lot of my maps by hand and have only recently started trying to do them on the computer. When I make a fantasy map, I tend to use the ideas of the Ancient, Medieval and Renaissance time philosophies about where cities should be placed, where they would grow up and such. I have a small little checklist I use as to determine the location of various sites, be them Cities, Castles, Forts or other various kinds of settlements.
For Cities, Villages and Towns I would say the following, while not in a particular order, were considered important for the founding of a settlement.
1. Food and Water - Without this normal races can't survive. They need ample food or water to sustain the population or have trade with other settlements to supplement what they themselves cannot produce. This tended to be one of the largest, if not the largest, driving factor when civilizations would found new cities. Look at Europe or Asia as an example, all throughout time, up until the modern era cities were placed for their locations in proximity to water. Along rivers, near the ocean, or near lakes. Rarely did a city get founded unless it could supply itself with water as the idea of transporting water somewhere in bulk is a relatively new idea in ways of carrying it out.
2. Security - This I imagine as secondary in comparison to the need of food or water. For forts or castles this played a more important role as their roles were defense coupled with power projection. If you have a new country founded say from four or so cities, they would likely build castles in their cities, and nearest to areas where natural barriers (forests, mountains or deserts) were not present or were easily navigated. Sometimes they would be placed along the coast of a large lake, inland sea or the ocean itself so as to ward off raiders or invaders. Depending on the size of the threat I would say that would depend on the size of the military presence. Also it is wise to have scattered internal fortifications throughout the nations so as to help in the event of civil war, rebellions or other matters that may arise well away from the perceived front lines.
3. Resources - Now comes the economics of it. Are they nearest or on top of a resource that is either in high demand or rare. Diamonds, Gold, Iron, other precious commodities like spices or silk, various things that in the end drive industry. If there are mountains in your nation it is likely you will have mining villages or cities nearby if they are metal or gem rich, castles for defense and depending on the climate the logging industry. Honestly I don't think too much depth on this one as it is rather straight forward. Cities go where they will drive the economy, assuming they are nearer to a water source (lake, river, spring, etc.)
4. Species Choice - Sylvan Elves are forest folk, while dwarves belong to the mountains, humans to just about anywhere, and other races have their preferences as well. In a fantasy setting that includes races it does make sense to place them according to where that species would naturally gravitate. You wouldn't put dwarves amid the sand dunes or in the verdant plains where cattle graze. I mean you could, but it wouldn't usually fit them too well, no mountains to carve their great citadels into. You wouldn't put Sylvan elves in those places or in the high mountains lest they be out of their "natural environment." When placing cities, castle or other settlements makes sure that if they are inside a racially dominant nation that they are in places where that race would ideally settle.
I have found that with fantasy comes the difficult challenge of attempting to balance these four things while making a map that actually seems like the locations are placed "naturally". Though Fantasy itself could be called, "unnatural." I do hope this helped and if not then sorry for the rant!
-Eternal Rose
P.S. Nice map!