In Humankind, one of the key aspects of diplomatic relations with other empires is whether or not you will go to war or settle your differences peaceably. Should things come to war, you will need an army to defend your borders and press the attack.
Your army will be comprised up of different units, all of which have upkeep in the form of money. In addition to this, units will also require a population, at least one but sometimes two. So if your city doesn't have the population to produce the unit, you cannot build your army.
You can however disband your current units within one of your territories to get a population back. If you are not within one of your territories, you will not be able to disband that unit. To disband a unit, simply click on the unit, and in the unit tab, click the disband button. If you have multiple units grouped together then you must click on the specific unit you wish to disband.
This adds population back to your city so that you can recruit new units. Another time this is helpful is if one of your cities is low on population. Rather than wait for it to generate naturally, you can send a unit to that specific city and disband them. This is a great way to get a city up and running quickly.