At the very start of the game and when you build a new village you can't convert it for a few days. What converting allows you to do is convert your village to another village type.
Converting your village deletes all your buildings in your village
You castle remains and does not lose any buildings
All your resources remain and will be available once you build your stockpile, granary and Inn
If you convert your village there is a cool down of a few days before you can convert it again.
Because of the cost in terms of losing your village buildings make sure you always know exactly what types of villages you want to have and convert as soon as possible and stick with that village type.