yeah, like the other guys said, they're connected to ur trade network..
i would add on 'potentially' to that though...there are say about three levels...
(unconnected- no arrows)
connected-arrows
connected- u still see the arrows, but ur trading resources with them
connected with open borders- you see the arrows and some sort of parchment/scroll graphic...now your cities can trade with them and build up trade routes, these of course are computer generated which makes it a bit random for a normal player to understand why a particular city is connected to another, but still.its there.