Combat is fought with space ships, which are valuable and unique. Ships can be lost only in critical circumstances, usually they have ability to retreat and repair (but not for free).
Ships are organized in fleets, which are semi-permanent structures. Drilling and especially fighting together raises fleet cohesion which gives it very significant combat bonuses. Changing the fleet structure quickly results in cohesion loss and then it has to be recovered, so fleets are intended to stay mostly the same. Fleets include support ships which do not fight, but increase fleet capabilities, such as supply storage or scavenging speed, and support ships are included in fleet cohesion.
Active fleet consumes a lot of resources, so in peace time they can be kept either mothballed (will require resources and time to bring it back up, plus loses cohesion fast) or on standby (crew stationed out of the fleet, moderate upkeep, loses cohesion slowly).
Structure: structural integrity of a ship. When it reaches 0, ship is destroyed. When structure is lowered, ship has increasing chances to experience a system failure which might impact its performance or force it to escape earlier. No failures prevent escape.
Surface: vulnerable surface of a ship. Larger ships are generally easier to hit.
Maneuverability: ability to evade enemy fire. Decreases effective surface.
Supply storage: how much supplies ship can carry. In-combat resupply is generally not possible, so that defines how soon ship might have to retreat.
Weapons: ships can install various kind of weapons which might be useful either in combat or siege. Weapons hit enemy ships and drain their Structure. Weapons also have tracking parameter, which can offset effective surface malus.
Warp weavers: defines how intact ship will be after emergency retreat, as well as how effectively fleet can move and siege across starlanes.
Supply storage: support ships carry the fleet supply, which is replenished either from friendly supply lines or by other ways like scavenging or trading.
Troops: these can assault planets or space stations. Lower number of pods means invasion will be going slower annd might need supply line to replenish troops.
Operational supplies: fleet might include ships capable of extending the supply lines.
Warp weavers: support ships can carry dedicated weavers to facilitate fleet movement.
Ships are based on hulls. Hull determines basic parameters of a ship and number of available slots. Hulls have their distinctive advantages and are not direct upgrades.
Depending on race, pilot might increase different ship parameters. Using AI for a pilot applies a malus to most of them instead, but makes ships loyal (except when hacked). Using human pilots makes fleet subject to infiltration, rioting ot unrest.
Combat strategy affects ship's choice of targets. For example, it might prioritize easy-to-hit ships, or specialize on most dangerous ones.
Ship's Surface and Maneuverability add to Effective Surface. When choosing a target, ships with higher ES weigh more. So, if no other ships are left, ES will not do anything.
When several fleets of hostile stance meet (either arrive at same system or collide in a hyperlane), a combat starts. Combat consists of three rounds, during which every ship gets a chance to fire their weapons. Targets are picked based on chosen strategy and effective surface, randomly. When round is over, dead ships are removed or escape. Escaped ships eventually reappear at rally point with low HP.