Rally point is, like in most RTS and TBS, a place where new units from a factory automatically go.
For example, say you have a city "Military Base". It is the head of your assualt, and you want every unit, once built, to move to that base without you having to manually clicking G on every unit. Simply right-click on a city and select "Set Continental Rally Point", and target that city. In that manner, you are declaring that all new units made (on the continent) will automatically be set to going to that city, without you having to manually do every single one.
This is very usefull when you are in a Communist government in the Industrial Age, when you have the capability of producing 10+ Cavalry per turn amomg your cities.
Or, something simpler. You simply want a single city to move every unit they make to the nearest city. I'm not sure why, but just select "Set Rally Point" on that city, and then target the other city. Every new unit made will automatically be set to going to the other city.
