Every army has a heroic character to command it. We refer to this character as the General, although this is only to distinguish him from other heroes. He might be an Orc Chieftain, a Bretonnian Duke, an Elector Count of the Empire, or whatever. Many armies are commanded by the ruler of their entire nation. The Emperor of the Empire and King of Bretonnia are mighty warriors who are ever ready to ride out at the head of their armies for example.
The general of your force is always the character with the highest leadership value. If several characters have the same value then choose one to be the general. He is in command of the whole army and, more than any other model, represents you personally. The general is an important character because he can inspire others to fight on where otherwise they might turn and flee.
Any unit within 12" of the general model may use the general's leadership value instead of its own when making a leadership based test. This means that a unit near the general can use his superior leadership when testing for fear, panic and other psychology, or for break tests in hand-to-hand combat. A unit which is fleeing may use the general's leadership when attempting to rally.