Unit Supply or Military Unit Supply Cap is the the maximum number of Military Units you can field at any one time. This number, indicated on the Top Panel to your right, increases based on two factors: the total population of all of your cities, and the number of buildings or policies you have that increase your Military Unit Supply Cap. Some buildings, such as the Barracks, increase your Supply Cap by a fixed amount. Others, like Walls, increase your Supply cap by a percentage of the city's population.
Military Unit Supply Cap increases from static elements, like Barracks, and percentage bonuses from population decline over time based on your empire's technological level. You will need more and more percentage bonuses to overcome this and field large armies!
If, for any reason, you exceed your Military Unit Supply Cap, you will be penalized -5% Production and Food in all Cities (per unit over the cap up to a maximum of -75%).