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Lords can only be ransomed by their Faction. You will get a notice from the Faction with an offer, generally several thousand gold.
It is worth capturing Lords, besides for their ransom money. Taking a Lord off the battlefield severely cripples a factions capabilities. The fewer lords it has, the fewer armies it can field.
Some lords will also not like being set free. You can tell by what they say to you when you capture them. If they're haughty or insulting, you won't gain any faction with them if you set them free. If they seem honorable and compliant, then you will get a positive faction hit with them if you set them free. Basically - Always capture the rude and nasty Lords and set the nice and honorable ones free. That's the best balance.
If you get a Castle or Town, go ahead and upgrade its prison and then stick your captured Lords there. They have less of a chance of escaping an upgraded prison than they do when they are in your prisoner train.