Shadow of Mordor (and the sequel) had something called the "Nemesis" system where some of the Orc Captains you kill (and the ones who kill you) might survive off screen and get stronger and come back with scars and buffs and new nicknames. It didn't do the village/town stuff you are talking about. They talked about doing it in future games but never did.

Didn't find any good technical write-ups. Although apparently it's "patented".

Here's a decent video overview. I hate that everything is video now but this is the world we live in I suppose.

https://www.youtube.com/watch?v=3Fh5qc-ZnaM

Yes here's the patent. The independent claims are frustratingly broad if you're trying to think through practical NPC world sim systems.

https://patents.google.com/patent/US20160279522A1/en

Yeah, good game mechanics scarred by an IP royalty agreement.