I had a most epic encounter with a dragon inside Riften. I was exiting that church above the thief guild secret entrance and the attack music kicked in! I was like what? what the (censored) is going on?! Before I even saw the dragon all of the towns people were gathering at that little market in the center of town. I thought they were coming for me but then I saw ice rain down on them and arrows fly to the sky. I was like WTF!? Before I could even attack it the towns people had already killed it. I searched to see where the body landed but noticed all of the towns people were running to the graveyard so I followed. The dragon dead body laid dead in the graveyard and as I approached his soul was mine. The towns people stood in a semi circle, cheered as if I had killed him and then when back to there daily duties. Unfortunately there were quite a few dead NPC's so I hope I didn't lose out on any quests....naturally I looted them.

I've had several attacks on walled cities as well. It seems to happen more often if you fast travel.

The chance of them spawning inside the cities greatly increases if you use fast travel.