All the dungeons in the world exist at the start of the game, but may be upgraded (or downgraded) by the player using Dungeon Points. DP is collected simply by having adventurers in the dungeon. It's something like 1 DP per second per adventurer. The more adventurers that are in the dungeon for a longer amount of time, the greater the DP intake.
Dungeons are born as single screen areas (the reason is that I want them to be like aquariums where you can just sit and watch an area). You can buy additional screens for DP. For instance, a castle may start as a single screen with the entrance on the ground floor and going up five or six floors. After you've gotten some DP for this dungeon, you can purchase a screen above (more castle tower) or below (dungeons). Each dungeon works differently. Some just go up or just go down, some grow in multiple directions, some grow left and right. Each new screen you buy must be explored fully to build off of it.
The level of the dungeon is based on the quality of loot, density of monsters, number of screens, and so on. The dungeon level is dependent on factors and is not directly addressable by the player. Many of the ways the player can upgrade the dungeon is based around this level. For instance, the player cannot upgrade the quality of loot in the dungeon too far before he must also increase the difficulty of enemies.
The enemies and loot in a dungeon automatically respawn after a certain amount of time. Loot is randomly selected from a certain level of quality that can be upgraded with dungeon points. Loot quality is tied to a certain range based on the level of the dungeon.
A dungeon initially beings with only a single monster type available. That monster type will be spawned in at specific intervals at a difficulty level that, like loot quality, can be upgraded (or downgraded) with DP and is within a specific range based on dungeon level. The monsters will continue to spawn until they have reached a specific density, which is another factor which may be changed with DP.
With DP, one can purchase additional monster types, usually along a theme based on the dungeon. For instance, if it is a castle and your first monster is a sword knight, purchasing a spear knight will make that unit available for spawning as well. Initially, you may only have four different types, but you can unlock additional slots as the dungeon gets bigger.
In additional to basic upgrades, the player may also purchase named monsters. These are elite creatures of increased difficulty that give flare and value to the dungeon. As soon as a creature is purchased, the Adventurer's Guild will automatically put up a quest to defeat it. Named monsters tend to give out better exp and loot in general.
While unlocking rooms for the dungeon, the player may stumble upon Unique Rooms. These rooms usually involve a specific quest and come with unique encounters. For instance, you might unlock a new screen only to discover that it is a Treasure Room. In it, there is a lot of free loot and gold laying around, and the Adventurer's Guild will put up a quest to bring back the unique treasure (other treasure is available to anybody who walks in the room, but the unique treasure can only be collected by quest hunters).
Another unique screen may be a specialty shop or a damsel in distress or a group of enemies which then spread out through the level. There is one special screen which can only be unlocked after all others and after the loot and monster quality levels are at max, and it is the Boss Room. It comes with a special angry boss monster requiring a group to defeat. Beating the boss will get adventurers lots of xp and loot, and the dungeon gets a whole bunch of DP. Once the Boss is defeated, it will occasionally respawn at a significantly reduced rate.
The idea is that you upgrade the dungeons in set intervals. Rather than building the dungeon from spare parts, you instead unlock it piece by piece. Upgrading the dungeon too quickly will cause it to outpace the adventurers, so you need to keep an eye on who will actually use the dungeon. At least you can downgrade the dungeon if you go too far.
After the boss has been defeated the first time, the dungeon has essentially been "won". You may continue to upgrade it, if you'd like, or you can demolish the dungeon and have it replaced with a new one. The new dungeon will begin at newbie rank, but the DP earned on the previous dungeon will be carried over, so it can upgraded more quickly.
And that's Tiny World. Build a small city that you watch grow. Watch the little guys trek through dungeons. Upgrade the dungeons. Watch the guys defeat the final boss. Get a new dungeon and repeat. It's a game that doesn't really end, but should be pretty fun to watch.