Erfworld functions according to the mechanics of a turn-based strategy game (though individual units interact in realtime). In the real world, such mechanics are artificially imposed to create a simulation of reality -- in Erfworld, these mechanics are reality, and govern the world in much the same way the laws of physics govern the real world.
The mechanics of Erfworld include:
The Hex Grid
The geography of Erfworld is laid out as a hexagonal-grid wargaming map. Locations are described by non-cartesian X-Y coordinates (possibly designating a line of hexes and a specific hex within that line).
The sides of a confict alternate turns. In The Battle for Gobwin Knob, the sequence of turns is: Charlie's turn (early morning) Stanley's turn (late morning), followed by Ansom's turn (afternoon), followed by an interval between turns (night).
Units may only move to another hex during their side's turn. Each unit has a specific amount of "move" which determines how far it may travel during one turn. At the end of the side's turn, its units lose any unused move, and may not leave their current hex until their side's next turn.
Erfworld units all have statistics that govern their capabilities.
Move: A measure of a unit's ability to travel across the hex grid. Units have their move reset to its full value at the beginning of their side's turn; unused move reverts to zero at the end of the turn.
Hits: A measure of the amount of damage the unit can sustain before it is croaked. Units regain all lost hits at the beginning of their side's turn.
Combat: Not explicitly described; apparently a measure of the unit's ability to inflict damage. (It is transcribed as "Attack" in one of Parson's Klog entries.)
Defense: Not explicitly described; apparently a measure of the unit's ability to minimize or avoid damage from an attack.
Some units have one or more special abilities. Known examples include flight, fire, regeneration, and poison.
A unit with the "Leadership" ability is called a "warlord" or "commander". A unit with magic-using ability is called a "caster" (more commonly, it is referred to by its specialty, such as Croakamancer, Dirtamancer, etc).
Determining Unit Stats
Warlords and casters can see the stats of a unit directly; Lookamancers can determine the stats of units at a distance.
Parson Gotti is a special case. He is a warlord (albeit with a bonus of only 2), but can only see other units' stats by looking at them through a pair of 3-D glasses that came with his first Stupid Meal. Also, nobody (not even himself looking in the mirror using the glasses) can see Parson's stats (the value "2" was inferred from the effect of his warlord bonus on other allied units).
Units may group into stacks with allied units. This provides a combat bonus, which reaches a maximum value when 8 units are combined in a stack.
A warlord provides a bonus to units under its command. Warlords also enable units in their stack to make directed attacks against specific enemy targets, or to refrain from attacking at all.
Casters are able to function as warlords with a zero bonus (however, they may provide other bonuses; for example, a Croakamancer leading uncroaked units provides a bonus to their combat ability). This is generally not done, because casters are too valuable to risk.
Units that come into contact with non-allied units (by entering the same hex) must automatically attack if they are not accompanied by a warlord. As noted above, a stack with a warlord can fight more selectively.
Correctly led units can gain (substantial) bonuses by incorporating dance moves and rhythm into their fighting style. Unled troops generally cannot dance fight, but uncroaked units led by a Master Level Croakamancer can. Being appropriately dressed for your style of dancing seems to help. Taste seems not to be an issue.
As noted above, the time of day in Erfworld is related to the sequence of turns. The fact that the sun sets after Ansom declares the end of his side's turn may imply that the turn cycle governs the time of day, rather than vice versa.