If anything, bike lights become more important in a city environment. With the huge amount of traffic that is present on city roads, the use of lighting on your bicycle can help to alert motorists of your presence on the city roads. Of course, in cities there should be less cycling on the roads and more cycling upon allocated bicycle lanes. Here, the importance of lights is almost reversed, as they are operating more for the safety of pedestrians than for the cyclists themselves. So, it is not really that front and rear lights become less important in a city, but that their purpose changes slightly. They are there less for lighting your way and highlighting hazards in the road, as the street lighting should do this adequately for you, but more for stating your place and position amidst the plethora of traffic that overwhelms city roads. This is important as, in the chaos of traffic on city roads, often a cyclist's rights can be neglected by pushy, aggressive drivers, which can then result in an accident.
The problem with city cycling is that bike lights suddenly become less noticeable amidst the sheer amount of street lighting, car headlights and the lights from nearby buildings. However, they should still be a necessity for cyclists, as these lights still help to distinguish them from a mass of motorists. The single lamp should be enough to help motorists distinguish a cyclist from a car, even amidst all of that light pollution. Yet, simply because a city is better lit than, say, the countryside, this does not mean that the appropriate lighting on your bicycle becomes irrelevant. If anything, your front and rear lights help to assert that you are part of the traffic on the roads.
Variations of Bike Lights
One way of helping to ensure you are distinguishable from car headlights (and other city lights) is by using the many different modes that bicycle lights have. The flashing mode will help to highlight that you are a cyclist amidst a stream of passing cars. The importance of city cycling is to differentiate yourself from motorists, and this can be achieved through the appropriate use of bike lights, helping to assert your right to travel on the road as well as an obstacle for motorists to see and actively avoid or overtake.