It means what kind of city is this? What is this city like would be: milyen a város (I received this explanation from my native Hungarian wife)
Shouldn't it be "Milyen ez a varos?" What is this city like?/ How is this city? ?
Milyen a varos. - What is the city like./How is the city? ?
in the city you say : "Ez milyen város?" but "Milyen város ez?" is also correct
Maybe it should be melyik, but I'm not sure, I also think it shoould be accepted.
I do not know how far milyen can be used. But 'which' would imply that there is a countable amount of choices, that would need more context - hence I am fine with this limitation to 'what'...
This is not a proper English sentence. "How is the city?" is appropriate for English. I cannot speak for how it translates from Hungarian.