Each unit is made up of sub-units (usually 10 but it varies). This is the number represented on the side of a unit icon on the map.
Each sub-unit has a number of health points, this is what the game calls Strength. If a unit has a strength of 3, that actually means that all its sub-units have 3 HPs.

Each unit is equipped with a certain number of weapons (some non-combat units don't have any weapons though, like regular supply vehicles).
In the game structure, weapons and units are independent from each other, and weapons are attached to units. For example the weapon AIM-9 (the Sidewinder short-range Air to Air missile) is equipped by several fighter aircraft in the game (such as the F16, the F18, etc), and for all these fighters the weapon will have identical stats. In short, a unit doesn't come with weapon stats; only weapons have weapon stats. And weapons equip units. Thus a unit is only as strong as the weapons it carries.

Weapons have 2 main stats: Firepower and Accuracy Rate. Firepower determines how many HPs (strength) a sub-unit will loose when hit. Accuracy Rate is a percentage (a number between 1 and 99) that determines the probability of a hit. Accuracy Rate determines this for targeted units that are Super High, High, Low, Hard Armor (like tanks), Soft Armor (like infantry), Sea, and Undersea.

To better understand how it works, let's take an example.
A tank with 10 sub-units and 3 strength (meaning each sub-unit has 3 HPs) is attacked by an infantry unit equipped with RPGs. In this hypothetical situation, an RPG has 2 firepower and 45 accuracy rate against Hard Harmor. For each infantry sub-unit, the game will calculate if the RPG actually hits something (45% chance). Then it will distribute the resulting damage randomly to the tank sub-units. Maybe all tank sub-units will end up with -2 HPs (since the RPG has 2 firepower). Maybe some tank sub-units will receive several hits and other zero. It's all random at this point.

Now there's a final important stat that I've left out for clarity's sake. It is the Avoidance Power stat, a stat carried by the unit and not by one of its weapons.
The Avoidance Power is a value that lowers an attacking weapon's Accuracy Rate. Just like Accuracy Rate, it is a percentage (between 1 and 99) determined for units that are Super High, High, Low, Hard Armor (like tanks), Soft Armor (like infantry), Sea, and Undersea.

Let's take another example.
An SPAA (Self-Propelled Anti-Air) unit on the "Ground" altitude level attacks an airplane unit situated in the "High" altitude level. The SPAA is equipped with an AA weapon with an accuracy rate of 65 against "High" altitude units. If the airplane has 25 avoidance power against units attacking it from the "Ground" (as is the case for the attacking SPAA unit), the SPAA's 65 accuracy rate will be lowered by 25, thus it will become 40.

Because of this, a unit with a high Avoidance Power (for example 99) can become virtually invicible: it will never get it by enemy weapons. I don't think a unit with such high Avoidance Power as 99 exists in the vanilla game, but it's possible to create one with the Weapon Editor. As a matter of fact I did, and it made the unit invicible against enemy units attacking it from the ground.

As another example, you can observe the below screenshot.



Note the values circled in red. The airplane's basic value for Accuracy Rate against the tank is 99, but it is lowered to 65 because the tank has an Avoidance Power of 34.
It's not always as clear-cut though, sometimes lots of other factors can be at play, like terrain, nighttime, and adjacent units.