Because any model railroad is limited in the amount of space available, one technique is to use buildings in the background that are fully finished on the front but have only a limited amount of depth to them. They are call flats. Also, because of the limited space, many times model railroaders used buildings of a smaller scale along the back of the layout to make them look like they are farther away than they actually are. I did this on my indoor railroad.

I purchased several fronts and a few sides of buildings in 0 scale from Ameri-Towne. After painting them, I glued them together using latex caulk and small sections of wood. The painting included making the mortar between the bricks look realistic, weathering the buildings and finishing the windows so they look real. I also used several signs on the buildings.
After fastening the building fronts together, I added shortened sides. I placed the buildings along the back of one section of my railroad and added people of the correct scale. You can see that they look pretty real. In this picture you can see the correct scale buildings in the front of the scene and the flats in the background.