Unlike the [major] American Universities, which are set in their own, landscaped campus, English Universities are usually located in cities, with the buildings dotted here and there. Durham is very much a University city - a huge chunk of the population is students. Accomodation is in two parts: the Hill colleges (of which my college, Van Mildert, is part) situated on Mill Hill outside Durham, and the Bailey colleges which are in the centre of Durham. The Science site is a separate site between the Hill colleges and Durham, and every other department is within Durham.

The same applies to places like London, except that the accomodation in London is rarely out of the way. It's more common for students to live in flats above stores.

That's not to say that all Universities are based in cities - some have their own, self-enclosed campus, but they're few and far between.