Disbanding is a voluntary loss of hp, ultimately resulting in the disappearance of the unit. Most games only allow it for a few types of units. Depending on the game, you may be able to disband the unit with one action, or you may need several before the unit actually goes away.
Units with occupants can disband, but only if the occupants are unaffected by the action. If the unit would vanish or lose transport capacity, then the occupants must be disbanded or removed first. (The interface may arrange to do this for you automatically.)
You always get back all of the disbanded unit's supplies, and they will
be distributed to other units nearby. In addition, the disbanded unit
itself may become a source of materials, according to the table
recycleable-material
. A percentage of the total material will
become available after each action, if disbanding takes several actions
to accomplish.