En ese pueblo viven unas doscientas personas, pero en agosto llega mucha más gente.

Because en expresses location: in / at that village.

• En ese pueblo = in that village
• A ese pueblo would suggest movement to that village

So here, the sentence first tells you where those people live.

Ese means that. It points to a place that is not here with the speaker.

In broad terms:

• este pueblo = this village (near the speaker)
• ese pueblo = that village (not here; often somewhat removed)
• aquel pueblo = that village over there / that village further away

In this sentence, ese is just the natural way to say that village.

Spanish often allows a different word order from English. Here:

• En ese pueblo viven unas doscientas personas

literally feels like:

• In that village live about two hundred people

This sounds natural in Spanish, especially when the sentence begins with a place expression like en ese pueblo.

You could also say:

• Unas doscientas personas viven en ese pueblo

That is grammatical too, but the original version is more natural in many contexts.

Because viven focuses on the fact that the people live there.

• Viven unas doscientas personas = about two hundred people live there
• Hay unas doscientas personas = there are about two hundred people there

Both can be possible, but they are not exactly the same:

• vivir stresses residence or permanent population
• haber / hay just states existence or presence

So in a sentence about the population of a village, viven is very appropriate.

Here unas means approximately / about.

So:

• unas doscientas personas = about two hundred people

This is a very common Spanish pattern:

• unos diez minutos = about ten minutes
• unas treinta casas = about thirty houses

It is not the same as the article some in English, even though it comes from the same word.

Also, unas is feminine plural because personas is feminine plural.

Because numbers like doscientos / doscientas agree in gender with the noun they describe.

• doscientas personas because personas is feminine
• doscientos habitantes because habitantes is masculine in grammatical agreement here

So:

• doscientas casas
• doscientos libros

Not all numbers change for gender, but the hundreds from doscientos onward do.

Because personas and gente behave differently.

• personas is a normal plural count noun, so it goes with a plural verb if it is the subject.
• gente is a collective singular noun meaning people in a general mass sense.

So:

• Doscientas personas viven... → plural verb
• Mucha gente llega... → singular verb

That is why the sentence says:

• llega mucha más gente not
• llegan mucha más gente

Because gente is grammatically singular.

So the adjective/quantifier must match it:

• mucha gente
• más gente
• mucha más gente

Not:

• muchas gente

Even though gente refers to many people, grammatically it is singular.

Because the subject is mucha más gente, and the core noun there is gente, which is singular.

So:

• Llega mucha más gente = singular verb
• Llegan muchas más personas = plural verb

Both mean something very similar, but the grammar changes depending on whether the subject is gente or personas.

Both can refer to people, but they are used differently.

• personas = countable people / persons
• gente = people as a collective group

In this sentence:

• unas doscientas personas is good because you are giving a number
• mucha más gente is good because you mean a larger influx of people in general

You would not normally say:

• doscientas gentes

Also, gentes does exist, but it is much less common and usually has special uses, not the everyday meaning here.

In Spanish, months are normally used without an article when saying in August, in May, etc.

• en agosto
• en mayo
• en diciembre

Spanish also does not capitalize months unless they begin a sentence.

So:

• agosto not Agosto

You may sometimes see an article with months in other structures, but here en agosto is the standard form.

Because Spanish often uses the present tense for:

• general facts
• habitual situations
• repeated events

So this sentence means something like:

• Normally, about two hundred people live in that village, but every August more people arrive.

It is not just talking about right now at this exact moment. It is describing what usually happens.

Yes, that is possible, but it changes the meaning slightly.

• mucha más gente = many more people than usual
• muchísima gente = a great many people / loads of people

So:

• mucha más gente makes an explicit comparison with the normal population
• muchísima gente emphasizes quantity, but not the comparison as clearly

The original sentence contrasts the usual situation with what happens in August, so mucha más gente fits very well.

Pero means but and introduces a contrast.

The contrast is:

• normally the village has only about two hundred residents
• but in August many more people arrive

So pero links the two ideas and shows that the second one is different from what you might expect from the first.