The term "Language" on Erfworld refers to a language that is commonly spoken at least by some members of all sides in the geographical vicinity of Gobwin Knob. "Language" is similar to English on Earth, and more closely similar to Common in Dungeons and Dragons. Not everyone on Erfworld speaks Language. For example, Vurp informs Parson that not all the Hobgobwins in a tribe speak Language but speak a language particular to either their race or their tribe.
Many of the things that exist in Stupidworld do not exist, or just barely exist, in Erfworld. Erfworlders may or may not have words for these things. For example, the closest thing Erfworld has to children are piglets, which grow up over a number of turns. Most Erfworlders pop fully grown, and have no idea what a child is. However, they will instinctively understand what the word, "year", means, even though Erfworlders usually use hundredturns as a measurement of the magnitude of time, and Erfworld does not have any natural phenomenon that would make years a useful measurement. Similarly, even though Erfworld has imposed "croak" as a euphemism for "kill", and it will never naturally occur to an Erfworlder to use that word, they will still understand it if they hear it from a Stupidworlder, though it will feel vulgar to them.
Since Units pop as adults, they are all created knowing at least one language. The fact that they are not all created speaking the same language is probably a feature deliberately designed into the system by the Titans. Perhaps some tribal languages were designed to facilitate specific tasks. For instance, maybe Marbit and Gobwin have many terms useful in mining. It's also possible that different sides were given their own language in order to make it easier for said sides to keep secrets from other sides. It's possible that Thinkamancers can't read the mind of a unit if it's thinking in a language which the Thinkamancer does not know.