What's the difference in meaning between in town and in the town?
Not much, really. in town is used a lot to mean "not away". Typically, which particular town is implicit, established by the surrounding context, by association with the person speaking, something like "our town" or "this town". It's like at home.
You add the when the identity of the town is previously established in the conversation. Then in the town means in the town we mentioned earlier.

Peter has a job that requires him to travel occasionally. Sometimes he's in town, and sometimes he's on the road.
I was surprised to see Jack yesterday because I didn't know he was in town.
The Pepper Bell is the best restaurant in (the) town.
Do you prefer to live in the country or in (the) town?
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The opposite of town is village for the best of my knowledge.
So the following should be fine too.
1. Where is he now?
2. He went to town.

3. Where is he now?
4 He went to village.
So the fouth sentence should be fine too.
town doesn't have an opposite. I don't think any concrete nouns do.
Aside from that, there are only a limited number of nouns that can be used in the structures we're talking about.
in town, to town, in church, to church, at work, to work, at school, to school, etc.
villageis not one of them. So your fourth sentence is not possible (even though logic tells us it should be)! Emotion: smile
Thanks CalifJim
I have learnt he went to town means that he went to his own town or rather the town he is used to go for shopping or some other
He went to the town means some specific town. It tells you that he didn't go to the town which he is used to go for shopping.
So the village does not come under the category where we drop the article.
Being a native speaker you know these things.
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