I guess the confusion is that how would they change the village based on AI behavior if that AI isn't always simulated on the background. Obviously they don't need to render it graphically when you're not there, but you'd expect the village to change when you leave and come back. Could they just quickly run the simulation or "predict" what changes would have occurred when the chunk is loaded in? I'm genuinely asking, because I don't know how this stuff usually works.

Thats my point. If you want AI robots always building while you are not there, the game has to render those chunks and simulate the AI building. Perhaps not graphically, but still has to process it exactly the same as if you were there. Otherwise the game just has to fake it and slap in a pre-built castle as if the AI built it, but then thats not AI at all, thats just slapping down pre-builds.