When a unit is moved onto the same space as another one of two things happens.  If you own both armies, you can trade troops between the two.  If the army belongs to another player, combat ensues.

Battles in Legion take a strategic approach to combat.  Before a battle, you have the opportunity to place your troops and select their formation.  The formation depends on the unit type - legionnaires will have a wide variety of formations available including wedges and crescents, while peasants are pretty much limited to entering battle as an undisciplined mob.  You can also give each unit advance orders which can specify a delay before moving into combat.  As you are preparing your troops for battle, you won't always be able to see the makeup and position of the enemy forces.  The computer scouts the enemy before battle placement begins, which results in a random level of intelligence on the enemy.

Battles take place in real-time, but you won't have any control once things begin.  You'll have to take on the role of an ancient general watching the battle from a nearby hilltop, and hope that your pre-battle tactical placement was sound enough to carry the day.  Battles continue until one side is routed from the field, which always results in the complete destruction of the losing army.  Surviving units gain experience from the battle, which helps them to fight more effectively the next time around.

Proper pre-battle placement does have an effect on battle success, but it is not the only factor.  Superior numbers and quality of troops will win nearly every time.  However, specifying attack orders and formation does not give as much control over battle tactics as should be.  You can be successful as long as you follow some basic principles and avoid blunders such as placing your archers in the front line.  This occurs because once a battle begins units tend to just head for the nearest enemy formation.  For example, using cavalry to flank the enemy or to get at archers in the rear lines is impossible, since they'll make a beeline for whatever enemy troop happens to be out front.

To capture a city, you must move your army onto an enemy city.  You'll then have to fight a battle against the city's garrison and any troops present there.  The battle for a city is identical as any other, with a victory in the open field resulting in the capture of the city.  There is no siege component to the game, so taking Rome is no different than capturing a barbarian village.  Sieges at the time were long and complex affairs, and they have been completely glossed over in Legion.

In addition to combat, Legion has a diplomatic component as well.  You can propose alliances, pay tribute, and declare war on other nations in the game.  A nice touch on the diplomacy screen is the dynamic borders displayed on the map; it lets you see your neighbors and large rivals at a glance.  Unfortunately, the rest of the diplomatic side of the game is pretty weak.  Alliances and war declarations don't translate to much in terms of affecting gameplay, and there is no way to set the level of tribute sent to another nation.  In practice, the diplomatic portion of the game can be pretty much ignored, as you are essentially free to attack your neighbors one by one with little, if any, consequence.

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