Source: Warhammer Fantasy: 5th Edition

Allies
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Armies are not permitted to include allied contingents as the army lists normally allow. Instead, a player can ask another player to ally with him for a battle so long as he could normally recruit allies of that race. For example, High Elves can have Empire allies but not Undead.

The ally brings along 500 points chosen freely from his army list (as is normal for allies) but restricted by his own territory. These allied troops are directly under the command of the ally player who brings along and fights with his own models during the game. A player who includes an ally can therefore field an extra 500 points of troops, and this forms a considerable incentive to use allies. A player can solicit the aid of several allies if he wishes, but the total combined points value of all allied forces cannot exceed 500 points.

An ally does not have to put up any territory at all in order to fight. On the other hand he cannot win any new territory either. The idea behind allies is partly to allow players with small armies to participate, and partly to encourage players to conspire and politic against each Other! A player who sweeps all before him will find it hard to recruit allies, whilst other players will be happy to ally against him.

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