The atmosphere isn’t perfectly transparent, especially around cities where the air pollution makes it even less so. What happens in “light polluted” areas is the light from the ground is reflecting off the air above you and back at your eyes. Since most starlight is quite dim, that reflected light overpowers it so you can only see the brightest objects. There’s also your night vision. If you are surrounded by artifical lighting your eyes will never get a chance to adjust to the dark (takes about 30 minutes), so any faint starlight making it through the light pollution will be invisible to you anyways.
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