Alert status on Missiles causes them to launch to the nearest known opponent within range. Similarly, interceptors and bombers will fly out to attack enemies within range also.
However, the most useful purpose of Alert is for air cover on a city. If you build an interceptor (needlejet, high attack, no shields, air-superiority) and place it on alert, any air unit trying to attack your city (or a unit close to the city) will be attacked by your jet first /even if it isn't your turn!/
This would be an extraordinarily useful feature, except that there is a bug in the code--your interceptors can't tell the difference between an enemy unit and one of your own... so let's say one interceptor flies out to blow away one of yang's jets... then just about every other needlejet in all the nearby cities will fly out to intercept /your/ jet, and if they reach it, fly home.
The same thing happens if you move a transport near a city with an alerted interceptor...
So it's a big pain in the butt... but once in a while it will save you during your opponent's turn.
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