It’s called Pallet Town because of the typical white houses all over the village; however, in the Japanese version, it’s called Masara Village (though in the anime it’s named Masara Town).
Masara Village was named after a legendary hero, called Masara Ookido. He lived in the village about a century before the anime starts. He was showered with honors for being the only trainer in town ranking at the 921st position on the list of the best 10 thousands Pokémon trainers. Because of this, a monument in the central plaza was erected in his honor, and the village’s name was changed from Masshiro Village to Masara Village.
Masara Ookido was Professor Oak’s grandfather (Yukinari Ookido). Talking about Oak’s family, the professor has two older brothers: the middle one is Pallet’s postal office’s chief, while the older brother was the mayor at the time of the first series, and in fact he was the one who hired Gary’s cheerleaders.
At the time of the Advanced series the mayor was Gilbert’s father (a character appeared in Pokémon Chronicles).
Ash lives in one of Pallet’s typical white houses, and it’s very spacious and cozy. It’s on two floors, and on the exterior it’s surrounded by a garden, which in some places was turned into a kitchen garden by Delia, given her passion for gardening.
Takeshi Shudo in his novels “Pocket Monsters the Animation” hinted that Ash’s house is also the “Pallet House” inn, in which Delia works.
Pallet House is the only restaurant in Pallet Town, and on the second floor it’s also a guest-house. It was run by Delia’s parents, however she was forced to inherit it when her mother (Ash’s grandmother) died of illness, a little after Ash’s birth.
Delia runs the inn admirably, so much so that her cooking skills were mentioned in the book “Unexplored Regions: The best food in the little villages”.
The restaurant is located on the ground level, supposedly behind the house (communicating, obviously, with the kitchen), in which can be seen the little inn, visible only with a careful observation of some shots.
Regarding the remaining interiors, we know every single corner of the first floor, while on the second floor were shown just two rooms: Ash’s and Delia’s bedrooms. On the other side are located the guest-house’s rooms.
Ash’s room shown in some official sketches:
Fun fact: In Pallet Town also lives Mrs Masae, a “nice” lady who loves to gossip through her personal radio show!
> Episodes of the Pokémon’s anime
“Pocket Monsters: the Animation” books (the books are not yet translated in their fullness, so some informations could be subjected to some adjustments or updates until the work is completed)