A settlement is a colony or any small community of people. If a bunch of people build houses on the moon together, they’ll have the first lunar settlement. A settlement is also the resolution of something such as a lawsuit.
One kind of settlement is a place where people live. This can be a community that's smaller than a town, like a village. Also, if one country establishes a colony somewhere else, that can be called a settlement. The other kind of settlement happens when something is settled, like the end of a disagreement. A lawsuit is ended if there's a settlement — both parties make an agreement that often involves money. A settlement brings closure and resolution.