The era you are in limits how much many times a unit can be merged, a new era means you can merge units one time more than in the previous era.
By grouping he means that you cannot merge units that have been multiselected such that if you click on one of the units multiple units gets selected.
You may only have one unit select that is grouped with others, to check this select a different unit and try to select the previous again, if you only get that one unit it is not grouped.
There is a designated button in the unit action list to ungroup a subsection of the group from the rest, so if you have three selected and click on only one of them it will still be grouped with the two others until you hit that button in the unit action list, or move the one unit away from the others to a different plot.