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I can understand the confusion. What you're encountering is a difference in terminology and mechanics between Rome 1 and 2.
In Rome 2, re-training a unit basically means replacing a unit with a different later unit.
For example, playing as Rome in Grand Campaign, once you research the Tech "Cohort Organisation" you lose the ability to recruit Hastati and Prinicipe, but gain the ability to recruit Legionaries, (kind of like Rome 1's Marius Reforms, but it happens when you research it, not at a certain date.) Any existing Hastati and Prinicipe in your armies can then be "re-trained" into Legionaries, at a price.
It's a feature that's not used very much (it's basically Rome and a few factionss get to replace their Peltasts with Light Peltasts, though why you'd want to I've never been sure.)
As for how to replace casualties, for that you need to look at another Rome 2 mechanic, replenishment. If an army ends its turn in your lands, any units that aren't at full strength will automatically replenish some loses. The actual replenishment rate varies, and can be effected by a variety of factors. Not sure if they retain the battle experience, or whether it goes down to represent new recruits coming in. But basically it means over time any unit that hasn't been completely destroyed will replenish to full strength if in friendly territory. It just may take a while.
Good news is you can increase the replenishment rate in a variety of ways, including techs, character traits/skills, having a food surplus, putting the army in fortified stance, recruiting new units to that army (as that also boosts replenishment a little,) and probably some others I'm forgetting. It's possible to get it up pretty high later in the game, depending on the faction and the way the campaign develops.
As for merging, I think it averages out the experience level between the two (or more) units being merged, but not sure on that.
Hope that helps.
All the Best,
Welsh Dragon.