Outposts are minor defensive structures available to every civilization as early as the Dark Age. Unlike towers, they can't shoot at enemy units, but they do have a long line of sight and are cheap, so they can be a good way to keep watch over an area and warn players of impending attacks. An Outpost costs 25 Wood and 10 Stone.
Outposts are very good for keeping watch over an area that is key to security, and as they have a longer range of sight than towers but do not attack, they can keep watch over the enemy while being hardly noticeable. Outposts are also commonly used to keep watch over important resource areas to notify players of enemy expansion. They often become less common as the game progresses, due to the availability of better scouts such as the Light Cavalry.
The world of 500 AD was far less populated than the world of today, and there were great expanses of empty and desolate land. To keep watch at the frontier, lords established outposts that would provide early warning of attack and report movements of settlers and trade caravans. As the land became more populated and more settled, outposts were replaced by establishing castles and communities on borders.