The Palace is a special national wonder that defines the location of a civilization's capital. In addition, it is a powerful building in its own right, producing culture, happiness, espionage, and commerce.
Unlike other national wonders, the Palace may be moved. When a civilization founds its first city, it gets its Palace there for free. After that founding, the Palace cannot be built elsewhere until the civilization has at least six cities. Then the Palace may be moved to another city by building it there. When a new Palace is completed, the old one is removed.
When a civ loses its capital, a new capital is chosen from among its remaining cities, and a new Palace is built there for free.
When populations began to organize their communities into cities, their governments became more structured and formalized. At an early stage, the ruler of the city established headquarters from which the business of running the city was conducted. In many cases, these buildings also served as the living quarters of the ruler. In wealthy cities, these facilities often expanded into immense, sprawling palaces. These richly adorned, imposing buildings were a source of civic pride, and helped to reinforce the aura of power surrounding the ruler.