Riots are very dangerous. Riots occurs when City Happiness isn't maintained. They start from demonstrations, and change into riots if you still don't change anything with happiness. Riots spread very fast, ignite nearby buildings to show their protest, cause traffic and can eventually lead to bankruptcy in small towns. A notification will appear "There is riot for (reason)!" or "There is riot for no reason!" (when you manually deploy them). They can be "removed" only with SWAT or military vechicles. Having only military base isnt such a good idea, tanks arent controllable. Also, rioters can't walk on bridges.
Few things from: theotown.wikia.com