Farms provide food to the people. One level 1 farm provides 40 food per time unit (usually 30 seconds). That is enough for 1000 citizens.
In order to have a successful economy you need at least 4 farms, upgraded to level 10. 5 farms might be better in the later stages of the game, to ensure a big population.
A smart configuration would be to have 5 farms, 3 woodcutters, 2 stone quarries and 2 iron mines. Another possibility is to have 4 farms, 3 woodcutters, 3 stone quarries and 2 iron mines. If you are feeling extremely aggressive you can try to use 4 farms, 3 woodcutters, 3 iron mines and 2 stone quarries.
When food is not enough, population health will deteriorate, and the numbers will start to drop.
The Slow Population Growth button from the Townhall, allows you to set a population number that won't grow and won't drop too much. Population will vary slowly around the number you have set. That brings the advantage that your population will not starve when by outgrowing production. In order for this to work, you must have food supply above zero always, health above 90% and happiness above 80%.
People pay taxes to the realm, and thus they are always great to have. A bigger population means more gold. More gold means more soldiers can be paid to defend your realm, and attack the enemies.
When gold runs out, your soldiers will abandon you, so pay attention to keep your treasury full.
Other resources like wood, stone and iron are used to build structures, castles, to upgrade your realm, and to build soldiers.