Learn Russian: Это далёкий город.

Here, это means 'this is' and acts as the subject of the sentence. When you point something out and say 'This is a...', you always use the fixed word это, no matter the gender of the noun. You would only use этот (masculine) if you were saying 'this city' directly, like in этот город далёкий (this city is distant).

Where is the word for 'is' in this sentence?

In Russian, the verb 'to be' is skipped in the present tense. So, это далёкий город translates literally as 'this [is a] distant city'.

Why does the adjective далёкий end in -ий instead of the usual masculine ending -ый?

This happens because of a very important Russian spelling rule. You can never write the letter ы after the letter к (or after г, х, ж, ч, ш, and щ). Because the word's root ends in к, the ending must change from -ый to -ий.