Whilst moving, a unit is not allowed to approach closer than 1" to another unit, friend or foe, or impassable terrain.
This rule is purely for clarity. It's important to be able to tell at a glance where one unit stops and another begins. If they're too close together, this can be particularly difficult – especially if both units look the same. Similarly, in the case of two units from opposing sides, the 1" apart rule makes it absolutely clear whether or not the two units are merely close to one another (in which case there will be an inch between them) or in close combat (they'll be in base contact).
You'll notice that this rule does not apply to the charge moves discussed later. This is quite sensible, as the whole point of charging is to get a unit into base contact with an enemy. Occasionally, a unit will have approached to within 1" of a unit it did not charge as the result of moving into contact with a unit it did charge. This is perfectly acceptable, although players may wish to nudge the units further apart to maintain a suitable degree of clarity.