Blitz in this case refers to the term: "blitzkrieg" roughly meaning "lightning war", which was a term used to describe the strategy employed by the combined arms of the german wehrmacht and luftwaffe during the beginning of WW II. It's a strategy most noted for quickly attacking in succession, while denying your enemy the chance to gather its troops or form any cohesive defensive plan.
In the game, the blitz ability translates into a unit being able to attack once for every movement point it has (note: if you attack a stack, you'll use up one movement point to attack and another movement point to retreat back to your original scare after you defeat the unit you attacked, for a total of two movement points. )
Panzers', modern armor and the like have the blitz ability as well as armies.
The ability to retreat is given to "fast" units. A fast unit is a unit with more than one movement point. You will need an army compromised solely of "fast" units in order to be able to retreat, as I believe the number of moves per turn an army gets is based directly on the number of moves per turn the units inside of it have. So if you have a unit with one move per turn, it will be the slowest unit and will set the pace for the rest of the army, making the army as a whole, not fast, hence unable to retreat.