The unit just determines where the city is built. You still have to produce the equivalent of a settler in another city.
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Works as follows
- Recon unit finds a site that looks good (might find Yddragsil on the opposite side of the continent for instance)
- Existing city completes a project named "Prepare Expedition"
- Recon unit is then able to found a city where-ever it happens to be (doesn't cost the recon unit, it can act as an initial defender)
The main benefit is that you don't have to escort a settler across all that hostile terrain. You can also prepare an expedition in advance and use it as soon as you find a suitable spot. Only one can be on hold at a time though. Once it is used, you need to complete another "Prepare Expedition".