"Urbs" is the "normal" noun. It means it's the form of the noun, when it's used outside of a sentence.
And it's also the form of the noun when it's the subject of a sentence (=nominative case, nominative form if you prefer).
"in" require the case to be "urbe". If you see the declension table, you will see that "urbe" is the ablative of "urbs".
Because in + ablative, is used in Latin to indicate a static location, without a move. They sleep in the city, so they won't move, so we can use a "static ablative".
krtzrovavrt, I believe these two vowels are/were pronounced separately, something called «hiatus» in linguistics. Examples in Indo-European languages include: the Spanish «maestro», and the French «naïf». It's definitely an aspect of Latin pronunciation that one should be aware of, although many people simply render it as a diphthong.