Actually, the AI has very few military units.
I am also leading on tech since I have 20 cities and the AI has from 4 to 8 cities.
I believe I have more military units than the four remaining AI players combined.
I play on Warlord difficulty and at turn 270 I have one more capital left to conquer before achieving dominance victory.
My next game will be on King difficulty, we shall see if the AI produces more units on that level.
I recently played a Prince game where I used Theocracy to build 2 Field Cannons and 6 Artillery and already had 6 Conquistors. I was a little ahead on technology and not sure what Frederick still had, but he showed up with only one Field Cannon to defend the first city, a 2nd Cannon showed up to defend the 2nd city. After capturing four of his eight cities, he would still not give me a reasonable peace deal. Only after taking three more cities, leaving him a lone very new city, did he offer somewhat reasonable peace terms; he still would only cede the first two cities though.
In my current King game, Tomy was willing to give me good peace terms, after killing a 15-20 of her Horsemen. I was playing Gandhi and a Varu can decimate a Horseman with only two attacks in the field. She can really spam Horsemen fast. In any case, she was willing to cede about half the conquered cities when she was first ready to talk. Of course, I had killed dozens of her Horsemen and had not lost a single unit and I was significantly ahead in technology (probably about 10 techs ahead).
So what
Cougar7 says is probably true from my experience at least. You have to have both a larger military and higher military technology before the AI will give close to reasonable Peace terms. This is not satisfied if the AI Civ has either a larger military or higher military technology. In my Prince game, I had a larger military, both did not have a significant lead in technology until I took all but one of Frederick's cities. In my King game, my Varus were outnumbered 1 to 5 initially and I had a significant technology lead. Once I killed enough Horsemen and built about eight more Varus, my military finally exceeded her's and she was finally willing to talk peace and offered reasonable peace terms.
So I believe
Cougar7 has it right, but there are still so many bugs and unimplemented code in Civ, I'm sure there may be bugs in the AI's calculation of relative military strength and maybe relative technogical advancement too.
