They determine the level for you, if you go into each units description card it will tell you it's current armour level and the next armour level for upgrade, expressed in name rather than number terms.
In general if they don't start with partial plate, the best armour they can get is Heavy Mail, and if they start with partial plate the best they can get is advanaced plate.
however, most units start with eithier Light Mail or Partial Plate, so they only get 1 upgrade level, to Heavy Mail/Full Plate generally.
p.s. what Quillian said.
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