As Spatula said, using guard mode means that your unit won't go chasing a routing enemy. It will sit and take whatever the enemy can throw at it (particularly useful for a phalanx unit that needs to stay in formation). Unfotunately it seems, as mentioned before, that it's attack is seriously impeded.
Personally, I use guard mode only when using phalanx or when I'm seriously outnumbered by inferior troops. Then they can throw themselves at you and rout, then the next enemy units do the same. Romans are also good for this because of their high defence rating.