To answer Turtloopa's question, I believe that they referred to it as a village in the sense that several Pokemon inhabited that particular house/area. At least, that's my take on it.
Anyway, this is my favorite of the 'Ash catches a starter' episodes. It was odd to see Misty immediately want to catch an Oddish, even though she is a Water type trainer. Heh, oh well. I also liked the way this episode had Brock crush on Melanie. In fact, Melanie is probably my favorite girl for him. It felt so much more natural than all his other girl crazy moments in the later episodes. Misty's teasing of him also seemed much better than the ear pulling that I would find annoying in the near future (in those days).
Bulbasaur had the interesting role of being the protector and it was deadset against Ash intruding in its friends' peaceful life in the forest.
So, this is another of the more entertaining episodes of the series.