How to Abandon a City
In the Castle window there is a button saying "Abandon City." When this is clicked on you will get a message asking if you are sure you want to abandon the city. If you click that you are then your city will disappear from the domain.
Uses of Abandoning a City
People who are leaving the game often abandon their cities to get their might to drop and kill their troops. This makes them a smaller target for farmers.Another use is as a "free" Portal of Order, the city is moved from one place to another. However, when used like this it is necessary to rebuild the city from scratch which makes it less useful. Abandoning your cities cannot get you off of the domain because you cannot abandon your last city.