Age is, in a gameplay sense, how many "Midwinters" a unit's body has seen. The first Midwinter in a game is Turn 10, the second is Turn 22, the third is Turn 34, and so on. Winter marks the passage of time for a fellow, being a period of "unnatural" coldness.
Age matters most for those who are Old, of course. There isn't really a bonus for being young, but there is a penalty for being old. Every body has a "maximum age", however many years they can last before their warranty voids and they start to have problems. For most humans, this is 50. For most Undead, this is 500. For Pretender Gods, this is 1000 for the mages, and 5000 for almost everyone else.
Take a unit's current age and divide it by their "maximum" age. Let's call this "A". If "A" is 1 or greater, the unit will have penalties.
Penalties are rounded down to the nearest whole number; in other words, stats after the penalties are rounded up to the nearest whole number.
As you can see, cumulative aging bears diminishing problems, at least in this sense. The seven different levels have points to them, ranging from 0 to 6; let's call the point value of a unit's oldness "D".
In addition, whenever a unit ages while "A" is greater than 1, problems may occur. This is calculated per instance of aging, not per year aged, though it does take the age after the aging into account:
Just for an example, an Old human with a max age of 50 has a 15% chance to run into problems each year, if they're within 0; roughly a 5% chance to be Diseased, roughly a 7.5% chance to get some sort of minor affliction, and roughly a 2.5% chance to get some sort of major affliction (such as Feebleminded). If the unit is already Diseased, there's an 11.25% chance for a minor affliction and a 3.75% chance for a major affliction. If the old human has 3, they have only a 7.5% chance to run into problems each year. If the old human has no Death but 1, they have only a 10% chance to run into problems each year, due to their max age being 75.
Battlefield Aging can occur through Decay. Each round, a Decaying unit ages by 5 years. This rapid aging also does damage scaling off of that "D" value mentioned earlier:
The aging from Decay also causes the same effects as aging outside of battle, except that it also "pollutes" the pool of Minor Afflictions with Battle Fright and Profuse Bleeding.
In a nutshell, the damage-per-round from Decay looks like this:
Each round, a Decaying unit has a 1% chance to get a chance to throw off the magic on them. If they win or tie in a DRN check with their Magic Resistance vs. 15, they stop aging so rapidly.
If the unit never manages to bust out, Decay persists for a maximum of 100 rounds. This includes rounds after the battle is won, or after the unit leaves the battlefield. It is assumed that Twilight also ends Decay, though the writer of this page hasn't tested this yet.