Units from different armies, but which share the same alignment (i.e. either Order or Destruction – non-aligned units are always treated as being suspicious allies, as detailed later) are considered to be 'trusted' allies when they fight in an alliance. They are battling towards the same goal (or one so similar as makes no difference) and this common cause is likely reinforced by centuries-old oaths and the weight of a shared history.
Trusted Allies units are treated as 'friendly units' from all points of view. However, if a rule only affects a specific race, it will not affect friendly units of another race.
This means that, to give some examples, Trusted Allies units:
Can use an allied General's Inspiring Presence special rule.
Can be joined by allied characters.
Cause Panic tests in allies when they are destroyed, flee through allies, and so on.
Are counted as being 'friendly' units from the point of view of targeting spells, abilities and so on. E.g. They can be targeted by augment spells, but not hex, direct damage or magic missile spells, and so on.