Around 1 AD, it was still mostly occupied by semi-nomadic tribes. When did major towns start to appear, and why?
Urbanisation is a fairly difficult concept to explore in protohistorical and archeological context : traditionally, it was associated with the development of Classical Mediterranean cultures and towns and how they differed, or in the best of cases, could have influenced the Barbarian agglomerations of western and central Europe. Even if the last decades saw an important shift in understanding hilltop and lowland habitats outside a Greco-Roman mainframe, the question remains what makes a town and an urban center in the European Iron Age.
A comparison with Archaic and Classical Mediterranean civilizations would, in this regard, focus demographic impact, high-density and permanency of habitation, social specialization; whereas the study of protohistorical (but also, by comparison, with non-classical western cultures in Antiquity and Middle-Ages) indigenous societies would lead to propose non-classical urban models focusing on the functionality of agglomerations as economical, political and religious centers. None of these perspectives are inherently right or wrong and more than often overlaps rather than collide, even if it sometimes takes a cop-out (if comparatively useful) attitude in using the term “proto-urbanization”.
That being said, there’s a strong (and growing) archeological and historical argument in seeing first, quasi-cyclical,, elements of urbanization (or “differential urbanization) in western and central Europe, including in the region known at the turn of the millennium as “Germania”, for Hallstatt C (ca. 800-600 BCE) and Hallstatt D (ca. 600-450 BCE) and after a period of decentralization, in La Tène C (ca.250-150 BCE ) and La Tène D (ca.150 BCE - 1 CE) followed by transformations largely tied to the Roman presence or influence.
It should eventually be stressed that for most of the time period before the turn of the millennium, the geographical concept of Germania was either non-existent, or was mostly geopolitical (it’s possible a first form of the notion appeared in late independent Gaul) so to speak : Gaul, and southern Germania (Rhineland, Bade, Bavaria, Bohemia, mostly) were part of a same broad archeological horizon (defined by presence of similar production and consumption of material products). Most of the situation, with regional differences notwithstanding, allows us to use the situation in Eastern Gaul to illustrate what happened in southern Germania and vice-versa. Not before the Roman conquest would the Rhine, and eventually the Danube, be clearly defined cultural borders : I’ll try to provide with examples East and North of these rivers for the sake of the demonstration, but it’s really important to avoid an anachronistic perspective there.