By some random googleing I had come across a page titled Location, Location, Location, where a Chiang Mai based real estate company gives a short explanation of the administrative system in Thailand to make the foreigners understand how to read Thai postal addresses. I emailed some correction to the webmaster, and in his reply he notified me about yet another meaning of the word Muban, adding to the confusion on this term.
The etymology of "Muban" (หมู่บ้าน) is straight-forward. Ban (บ้าน) means house, and Mu (หมู่) means group, so literally it is "group of houses".
Let's start with the layman's interpretation. Muban is translated as village, so it will refer to any small settlement. According to Wikipedia, it refers to settlements of 5 to 30 families, but that is of course the European origin of the word. Larger settlements would be called town or even city. I don't know what term is used in Thai normally if referring to settlements outside the administrative use, which is the next topic.
The administrative use of course originates in that normal meaning of the word. While the recommended translation for Muban is also Village, maybe I should better follow the term used in the book Democracy, Development and Decentralization in Provincial Thailand, where the Muban are translated as "Administrative Village". One such administrative village may coincide with a single settlement, but can also include several smaller settlements. Or in case of a small town, the settlement may be subdivided into several administrative villages all sharing the same name and only identifiable by the village number, or share the same base name with one of the standard suffices I blogged about earlier. To give an idea about the size of these administrative villages, the average Muban consists of 144 households or 746 persons (numbers from 1990, I have not searched yet for anything more recent).
The third meaning are the gated communities, something hardly known here in Europe. But especially in the suburban area of Bangkok a lot of these can be found where the middle and higher class people live in protection from the poor. These communities are also called "Muban" in Thai, but of course they have no connection with the administrative entities.