1991 Explorer XLT.
Which gear is better for city driving? The "D" just to the right of the neutral marker or the second one to the right? I presume one of them is for overdrive but which one? Does one get better mileage in the city if it is not in overdrive?

You should not use Overdrive when riding around town or towing. Only use at highway speeds. Overdrive does give you better gas mileage because of the lower RPM.

Early overdrive transmissions needed to be run with the overdrive off in city driving. If you feel it shifting in and out of overdrive, you can use the second drive for city driving. Otherwise, overdrive will work just fine.