Zion, a city of over 250,000 humans, is actually a massive series of caverns deep under the ruined planet's surface, close to the planet's core, for warmth, power, and protection. Based on the understanding of the human government living there, the location of Zion is unknown to the Machines, until the Machines found a way into it through the Dock.
Zion is composed of several levels. These include:
- The Dock: A heavily armed and fortified area where Zion's hovercraft dock for recharging and repair. The Dock (and Zion itself) has a single entryway for her ships, which opens up to a long corridor filled with gun turrets and other weapons in the event of attack. When open, at least one APU unit is on guard while the defensive systems are stood down while hovercraft enter or leave the area.
- The Living Levels: The largest area of the city, these series of caverns that form a complex series of levels is the city proper for most of its population.
- The Mechanical Level: Generally not populated, these series of purposeful but deliberately simple series of machines keep Zion habitable through waste reclamation, water purification, electrical power, and atmosphere services.
The people of Zion believe that they had fought the Machines for nearly 100 years, as told by Morpheus in a speech made prior to the Machines' final assault on the city.
The humans of Zion believe that their city was built shortly after the destruction of the above-ground cities of man, and the creation of the Matrix. Their history tells of The One, who freed the first humans from the hold of the Matrix. The current year is unknown but Morpheus states it to be closer to 2199, as opposed to Neo's 1999.
The Architect tells the story differently. According to the Architect, Zion is in fact a place allowed to exist by the Machines as a form of control. Although 1% of the population subconsciously reject the Matrix, only a small fraction of that 1% are actually freed from the Matrix to become a citizen of Zion.
This is based on the population of Zion being around 250,000, while the population of the Matrix is in the billions (per Agent Smith's quote about billions of people living out their lives in the Matrix). The vast number of people still hardwired to the Matrix who have subconsciously rejected the Matrix but have not been presented with a redpill live out their lives with a splinter in the mind--always feeling like they are living in a dream.
Zion is a control measure designed specifically as a society expecting a messiah figure. This expectation, which is created by the Oracle's prophecy, helps to ensure that when the next One arrives on the scene that they will treat him as a messiah and cause him to eventually believe that he is the One.
This is because of the Architect's need for the One to take the code he carries (consisting of the rejections of 1% of the population) to the Source to be disseminated. This temporarily brings the Matrix to 100% acceptance, which will allow the Architect to perform a reload of the system.
It should be pointed out that the real threat to the Matrix is not Zion, but the systemic anomaly created by 1% of the population subconsciously rejecting the Matrix. Zion's location is always known by the Architect, as it is rebuilt in the exact same location as the previous Zion. With each iteration, the Machines get better and better at destroying it. It is allowed to exist only as long as it is needed. Once the One is found, trained and sent on the Path of the One to the Architect's chamber, Zion is scheduled for destruction. Most of the agents of the system are not privy to this information and act out accordingly.
When the One reaches the Source to disseminate the integral anomaly, he reinserts the Prime Program, which is the Architect's way of referring to the Path of the One. The Path of the One is a subprogram within the larger programming of the Matrix that ends with the One's arrival at the Source. It is a control measure to ensure that each cycle begins and ends with the One.
After disseminating the integral anomaly at the Source, the One reinserts the Path of the One into the programming of the Matrix by choosing 23 individuals to rebuild Zion. Because of Neo's actions at the end of the The Matrix Revolutions, the Prime Program was not reinserted at the time that the Matrix was reloaded.
When the One arrives at the Architect's chamber on his search for the Source, the Architect tells the One the history of the Matrix. By this time the One will have come to believe that he is the savior of mankind and will do what he needs to in order to save it.
He is told that he can either allow a fraction of 1% of the population to die while the rest continue to live in the Matrix, or he can allow all of mankind to die. Inevitably the One will choose to save humanity and will follow the Path of the One to the Source. Neo is unique in that he loves Trinity more than he loves humanity, and is willing to sacrifice humanity in order to save her.
Zion, according to the Architect, has been completely destroyed five times by the time of the sixth One, Neo, meets the Architect. As a result, the actual year on Earth is estimated to be closer to 2699, not 2199.
Unlike his predecessors, Neo defies the Architect's ultimatum and chooses to save Trinity from certain death. In so doing, he reveals a new truth about the Prophecy: It is, in fact, real. The Oracle gambles on Neo and Trinity's love to break the cycle of destruction for Zion by aiding Neo to realize that his mission was not to meet with the Architect, but to travel to the Machine City itself and confront the Source.
As Neo heads for the city, Zion is besieged by hundreds of thousands of Sentinels, tearing through Zion's defenses and readying to eradicate the populace and Zion's existence yet again, for a sixth time. But the Sentinels are instructed to stop their attack moments before they would break through to the living area of the city: Neo is in negotiation with the Deus Ex Machina at the time to save the city, and brokers a peace on the condition that Neo remove Smith from the Matrix.
After Neo successfully destroys Smith and his clones within the Matrix, the Sentinels retreat, the Matrix is reloaded, and Zion is saved, the cycle broken.