dread on a unit

[caravel]

Dread only applies to generals not every man in the unit. A general can increase in dread by acquiring one of the dread related V&Vs. These in turn are obtained either randomly or by slaughtering prisoners on the field. You can also increase your general's dread by assigning him a title that gives a dread bonus.

Dread has no effect on the battlefield. It's only purpose is to improve happiness (loyalty) in a province and it can only do this where the general in question is the governor of said province. In short: Higher dread governor = happier province.

-Edit: Well drone described it better.