It happens on battlefields, and the battlefield is usually chosen by the attacker. Battle is over when one side loses all morale. Units lose morale as their numbers are reduced, and if the enemy controls more victory locations than them. There are 3-6 victory locations on the battlefield. Besides damaging enemy morale once you control more victory locations, they grant you special features, e.g. villages replenish the stamina of your soldiers in their vicinity, and guard posts let you cast the "cloud of arrows" spell. Features granted are always pretty reasonable.
You can win a battle even with a smaller army by smart victory locations management, along with reducing troop losses.