A general gives a morale & combat boost to units nearby: the radius of "nearby" is determined by the amount of command stars. The strenght of the boost, too, is determined by the amount of command stars.
But.
Traits affect the whole army at a time. Hence, if your general suffers from tons of movement/campaign penalties (Starving; On his Deathbed; Extremely Unsure Troops) his command stars won't make up for it. On the other hand well suplied & confident troops can easily overcome the lack of command stars of their leader.
Since humans are generally speaking smart enough not to get slaughtered; the command stars never play a noticeable part on the battlefield. Only if your army is wavering before the AI onslaught will command stars help you, and even then, only limittedly.
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