You need a leader, which is created sometimes when an elite unit wins a battle. You can then move the leader into a city, and issue the "Build Army" command. The leader then appears holding a flag, so you know he now represents an army. You can then group three units together as an army. This is done by selecting the unit you want, and pressing "L". The 3 units you select this will now move and fight together, indicated by the flag carrying guy.
(Although leaders seem to be rare, and I think they might be more valuable when used to rush a wonder. )
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