A Formation Fighter is used to fighting alongside his brothers-in-arms in very dense formations; unless they're a Bad Formation Fighter, anyway. A square's maximum amount of Size points is adjusted by the lowest Formation Fighter value in its square. For reference, units without this trait are assumed to have a Formation Fighter value of zero, so even one of them in the square holds the amount of Size points a square can handle at 10; unless a Bad Formation Fighter is present, of course.

The maximum number of units a square can have is 10.

This is the "Bad Formation Fighter" icon, by the way.

For example, several nations have troops with Formation Fighter 2. For squares that only contain Formation Fighter 2's, 12 Size points may be accommodated; that's six Size-2's, four Size-3's, three Size-4's, and two Size-6's, but still only ten Size-1's. Arcoscephale has Size-3 troops with Formation Fighter 5, and it can fit five of those guys into a single square. Therodos has Size-3 troops with Formation Fighter -2, or "Bad Formation Fighter (-2)", so having even one of these guys in a square will limit the number of Size-3 troops the square can handle to two.