Castles are a large, end-game structure that are only feasibly constructed and controlled by a guild. They can only be built on Auroria. They are modular, allowing you to create your own castle with a unique layout, and introduce a new method of PvP with Castle Sieges.
There are a few benefits to owning a castle. The first is that Castles help to protect the activated Guard Tower you build the castle around. This guard tower (which looks like a giant stone sword) is what gives you control over the surrounding area. When activated, the sword will float in the air, and it is possible to destroy the stone and take control of the land if it is not protected.
Controlling this territory opens up new places to build houses and farms. On a crowded server, these may be the only places left to build.
Owning this territory means that you collect all of the taxes of properties that are placed on your land (and you can control who builds on your land as well). Keep in mind, no matter who places the castle and activates the Guard Tower, the guild leader is the one who owns that land.
Finally, you also get access to some resources that will be much easier for you to collect than others trying to invade your space.
To begin building your own castle, you must first claim the land by activating the Guard Tower. This requires crafting Purifying Archeum, an alchemy skill item made with 100 Anya Ingots and 50 Blood Archeum Crystal. The Purifying Archeum counts as a trade pack, and with it on your back, you are able to activate a Guard Tower, allowing you and your guild to control the surrounding territory.
The tower is initially unprotected however, making it easy for rival guilds to take control of it from you. In order to protect it, you must build walls, towers, gates, and ladders to form a castle. The blueprints for these items can all be purchased on Mirage Island for Gilda Stars(after Patch 1.2 the cost has changed to gold), or you could check the Auction House to see if anyone is selling them. Once you have the blueprints, you can place the various components in whatever shape and size you wish. Since each of these pieces will cost quite a bit of lumber and stone to construct, it is helpful to set up crafting benches so that you don't have to bring the stone and lumber trade packs long distances or overseas.
As with all buildings, there is an Eastern and Western style to castles. They look different but have the same function.
Every 3 weeks, your castles siege scroll will become available for purchase on the Auction House with a starting bid of 500 gold. Whoever purchases this scroll gains the ability to declare a siege upon your castle, which takes place on Sunday afternoon. The battle begins with 70 Attackers and 50 Defenders, the Defenders gaining an additional 20 members after 30 minutes. The main goal of the attackers is to breach the walls and destroy the crystal inside. Doing so will flip the respawns points for the two teams, and allow the attacking team to begin to channel the tower. The channel must continue for 5 minutes uninterrupted for the attacking team to claim the castle.
Defenders on the walls can activate fixed cannons (containing two functions, which allow an automatic shot targeting enemy gliders, and a controllable manual cannon shot) using a Blood Archeum Crystal while the attackers can bring Siege Weapons to try and destroy the castle walls or scale the castle walls. In the end, victory for the attackers means that they now control the Guard Tower and surrounding land, while victory for the defenders means they get a special form of currency, Coins of the Lord.