When you use the adjectival kind of "this", it has to agree with the noun's gender. Этот город, эта девочка, это яблоко, эти дети. In case of neuter words (like яблоко) the same "это" is used: Это яблоко. This is an apple. // это яблоко = this apple. The difference between a sentence and a phrase is made through context.
I hope someone can correct me in case I'm wrong so others can learn from my mistake, but I think it's because "это" in this example means "This is a". Using "этот" would make it "this city". Think of the list being этот (masculine), это (neuter), эта (feminine), эти (plural), это (this is a). Both are grammatically correct, but have different meanings. Like Olimo also explains above I think :)
Having "to be" conjugated for us would be really helpful. Looking back at the "lesson" for this section, it's not there; so I forget the subtleties of "this city" vs. "this IS a city", and so forth. But the explanation they've started inserting above the text box is helpful.
It is a city name.
Originally the name was just Novgorod ("Newtown"), but to distinguish it from the other, older and well-known Novgorod to the north, the city was often being called "Novgorod of the Lower lands". This land was named "lower" because it is situated downstream, especially from the point of view of other Russian cities such as Moscow, Vladimir and Murom. Later it was transformed into the contemporary name of the city that literary means "Lower Newtown".