Nolybab is a large city built underground in a giant crater. Oddworld is a planet of multiple layers, and many inhabitants reside underground, some very deep in the planet and many layers underground. The planet is almost "hollow" being built up of said layers, different ones varying in gravity, temperature, humidity and such.
The Magog Cartel (typically known as the "bad guys", e.g. Glukkons, Sligs) are the most likely to inhabit in these large, damp, underground cities, being the right atmosphere and humidity for them. Many of these cities are heavily polluted and have a large amount of smog hovering above due to their carelessness of the planet.
There are many other cities in craters, volcanic "holes" and crusts, and looking over the landscape they can be seen just poking out of these craters/holes/volcanic crusts.