Random Encounters are generally defined as traveling while at an un-scripted moment you will be faced by enemies, and depending on what game it is, the fight will vary.
In Dungeon Lords the random encounters can occur at anytime and anywhere, to include cities. There is a few exceptions, most notably when in shop. However while traveling outside, while in dungoens, or when inside towns, enemies can spawn and attack.
Enemies types are limited to surroundings and can be just a group of rats or a fire drake.
Random encounter rate CAN be adjusted in the main menu and make the game easier or harder.