Learn Russian: Раньше это был маленький город.

This is a very important rule! When you use это to say "This was a [noun]", the past tense verb actually agrees with the noun that comes after it. Because город (city) is a masculine noun, the verb must be the masculine был. If you were talking about a feminine noun like машина (car), you would say Это была машина.

Why do we use это instead of the masculine этот, since город is masculine?

When introducing or pointing something out ("This is..." or "This was..."), Russian always uses the fixed neuter word это, no matter the gender of the noun. You only use the masculine этот when "this" acts as an adjective directly attached to the noun, like in этот город (this city).

How exactly does раньше translate here?

Раньше literally means "earlier," but it is the standard way to say "in the past" or "previously." In English, we often say "This used to be a small city." In Russian, you express that "used to be" idea by simply combining раньше with a normal past tense sentence.

Why does маленький end in -ий?