Procedural generation has been brought into the spotlight recently (by Spore, MMOs, etc), and it seems like an interesting/powerful programming technique.
My questio
the most important thing is to analyze how roads, cities, blocks and buildings are structured. find out what all eg buildings have in common. look at photos, maps, plans and reality. if you do that you will be one step ahead of people who consider city building as a merely computer-technological matter.
next you should develop solutions on how to create that geometry in tiny, distinct steps. you have to define rules that make up a believable city. if you are into 3d modelling you have to rethink a lot of what you have learned so the computer can follow your instructions in any situation.
in order to not loose track you should set up a lot of operators that are only responsible for little parts of the whole process. that makes debugging, expanding and improving your system much easier. in the next step you should link those operators and check the results by changing parameters.
i have seen too many "city generators" that mainly consist of random-shaped boxes with some window textures on them : (