IIRC it halves the cost of producing military units and after some turns you can only build them and military buildings only. You can cancel it unless you make peace again. So not clever to use it if you are not going to attack someone.
I do not know, but for any FAQ-like questions as this one you can try posting on the CivIII "FAQ-like" thread (always on top of the forum), achieving a double objective:
1) get very likely a precise, complete and quick anser
2) please MarkG
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