Medaevum

Where your character, and presumably other people also, live.

How big can my settlement be?

It has to start small. You can put up a campfire and a few tents anywhere without spending Goodwill, that's fine, so it has to be a bit larger than that. A longhouse. 2-3 small cottages. Something for them to do, like a small mine.

What happens when I spend Goodwill on my settlement to expand it?

You make it bigger. A few more cottages here, a tower there, and so on. Every time you expand your settlement with Goodwill, you can add onto it a little more.

What if someone attacks and destroys some of my stuff?

You get the amount of Goodwill you spent on it back, and more for whatever else happened in the course of that happening.

And if they conquer it?

If someone outright conquers your settlement - there's no chance of getting it back, they destroyed it, they don't want to give it back, whatever - then you get the Goodwill that you spent on it returned to you. And the conqueror must spend Goodwill to restore the settlement back to its previous glory, with lots of derelict buildings and the like until then.

Why spend Goodwill on a settlement at all?

Insofar as there is a mechanical reason, it serves to justify your character's means. If they are a banker within a bustling city, a DM is more likely to accept that they have enough money to offer a huge bribe to an NPC. If they are a wizard being challenged on how wise they are, having a wizarding tower would be ample justification for why they are an especially wise wizard.

You can also make use of the NPCs within, if it makes sense to in context. If you have a barracks and a castle and some guy attacks, you're welcome to have NPC guards take issue with it; if two settlements are in conflict, they could well fight each other with armies. If you have a wizarding school, the occasional apprentice or journeyman NPC around town would be reasonable. Ditto, if you have a temple you could have the occasional blessed acolyte within the township.

Can I get weird with it?

Absolutely! As long as the idea can start small and expand with time, it can work. Do you want your settlement to be a flotilla of ships that travel from place to place, accruing more vessels along the way? That's fine. Do you want a floating castle? If you can justify to me how you have a floating castle, that sounds great to me.