Say you looking at a large town from far away on like a hilltop or a balcony…why does it seem that all the lights are flickering?
-M
Obstructions in your view such as water vapor, dust, heat, cause the lights to appear to flicker. I’m sure there are probably several other reasons as well, but off the top o’ me head, that’s the main ones IIRC. 
Another cause is the “nistagma” effect (I hope I spelled that right - I’m going from memory).
Try to look at a dim single point of light for longer than a few seconds (with the surrounding area dark). Your eye starts moving to put the point of light on the more light (as opposed to color)sensitive outer area of the retina. The stationary light source appears to begin moving.
As far as far-away towns and such, I think that the atmospheric disturbances that t-keela mentioned account for most of the flickering. But if you are focusing fairly hard on a source of light, your own eyes will make it begin to move as well.
Not obstructions.
It’s the same thing that makes stars twinkle.
It’s the wind, wind plus patches of air of different temperatures. Amateur astronomers have a word for it: “Bad Seeing.”
Air is a transparent material like glass, and like glass it bends light differently at different temperatures (i.e. it’s refractive index is not uniform when its temperature is not uniform.) Patches of hot and cold air create feeble prism and lens effects. The same thing happens in the hot air over a fire. This is happening all the time in the atmosphere, but it’s far more feeble than the strong lens/prism effects above a fire. Patches of different temperatures create the prisms/lenses. Wind transports these prisms/lenses between you and the distant objects.
So, why do distant light sources twinkle, yet distant objects do not? Easy: point-sources of light are like lasers: they have high spatial coherence. (Easy?!!) In other words, light from distant point sources can cast diffraction fringes on your eyes as the light waves take slightly different paths through the hot/cold roiling windy air and then recombine. The light shining on your face isn’t smooth, instead it’s frilly. The “fringes” are regions of wave-addition and wave-subtraction. They usually look like narrow parallel bars of light shadow. When they sweep across your eye, you see a flickering.
Try this: look at distant flickering lights, then cross your eyes so you see double. Look carefully at the pairs of flickering distant lights. Often you’ll find that the flickers of the two images don’t match! This happens when the diffraction fringes projected onto your face are shorter than the distance between your eyes. As the parallel shadow bars rake across your eyes, one eye is seeing one pattern while your other eye sees a slightly different pattern. (This same crosseye trick works for twinkling stars.)
Perhaps the word obstruction could have been improved on. IIRC my old astronomy/physics prof. called it impediments.
Try this:
http://www.islandnet.com/~see/weather/eyes/wxwatch2.htm
The twinkling (or scintillation) of stars is the result of the light rays being bent (refracted) and dispersed from their direct path by passing through air of varying density. The twinkling of stars is strongest when the sky is clear and it is windy, at least at higher altitudes. Stars nearer the horizon twinkle more than those overhead because there is more atmosphere through which the light must pass.
Street lights in the distance may also twinkle and shimmer, but here density variations in the air much closer to the ground are responsible. Remember the bubbles of warm air which produce fair-weather cumulus? Well, they have weaker cousins which form over urban areas, large bodies of water or rocky surfaces at night. When these bubbles move between us and low light source, we see the distant light shimmer and twinkle – the further the light source, the greater the effect.
The preceding is courtesy of “The Weather Doctor”
One astronomer may inquire to another about the seeing, which would hopefully enjoinder a reply about the turbulence conditions of the air.