Your units will have "levels", basically with higher levels they will just become more effecient, their attack and defense values raised, I don't know the exact math for how the leveling system works, but I believe abilities are based upon stat values. E.g. Defense lvl 8, warriors can buffet with their shield.
In response to Darvin's post, you can also use this as a lure, if you concentrated on other units and left your Spell caster at lvl 1, you could always use him as bait for an ambush, or just as a distraction. Make your spellcaster cast a low level spell in view of your enemy, they will be freaking out thinking something epic is coming, while your infantry is slipping over their back walls.