Back on Eruvin pages 23 and 24 we saw discussion of a "karpaf" which was there understood as a shed or other structure too small to be called a dwelling, but which could count to extend a shabbat boundary because it was owned. Here we have the same term introduced to mean something similar but different:
MISHNAH. A KARPAF IS ALLOWED FOR EVERY TOWN; SO R. MEIR, BUT THE SAGES RULED: [THE LAW OF] KARPAF WAS INSTITUTED ONLY BETWEEN TWO TOWNS SO THAT BY ADDING TO EACH ONE A STRETCH OF LAND OF SEVENTY AND A FRACTION THE KARPAF COMBINES THE TWO TOWNS INTO ONE.
The "Karpaf", then, is a buffer zone created around a town which extends its boundaries. Measurement begins outside its 70-2/3rd cubit limit. This allows two close villages to be considered as one entity, allowing full freedom of movement between them on Shabbat.
An example is given of a two towns divided by the Tigres river:
Said R. Saf5ra to Raba: Behold the people of Ktesifon for whom we measure the Sabbath limits from the further side of Ardashir and the people of Ardashir for whom we measure the Sabbath limit from the further side of Ktesifon; does not the Tigris in fact cut between them a gap wider than a hundred and forty-one and a third cubits? — The other thereupon went out and showed him the flanks of a wall that projected seventy and two thirds cubits across the Tigris.
Even the river between does not prevent the two towns from being "one" so long as their gap is less than the combination of the Karpafs assigned to both.