A Residential Building is where sims live. Buildings start as small homes, often trailers, leading up to homes, medium buildings, and up to skyscrapers.
Buildings with good conditions will often want to upgrade, which will bring in revenue to the city, and add population. When a building wants to upgrade, it will provide a list of building materials needed to upgrade.
Residential buildings provide the primary means of making money in the game, often netting 1000+ simelons per upgrade.