Woods are a terrain type which provides an advantage to any unit that occupies it. When a Unit occupies a wooded area, they are invisible to cursory vision, they will not appear even as unidentified unit tokens, even if they occupy woods inside your faction's Zone of Influence. Recon units can spot enemy units in wooded areas, provided the unit is close enough to see into the woods. Note that, while Recon units can see into the woods, they cannot see beyond them.
When an enemy occupies a Wooded area, they are granted a 25% Concealment Bonus to their Resistance, representing the cover provided by the thick foliage of the trees and brush. Also, if an enemy unit passes a wooded area without using Recon to identify any units hiding within it, the units in the woods will spring an Ambush, granting a significant bonus to their effectiveness against enemy units. Note that if the unit is not equipped to combat certain unit types, the Ambush bonus will not grant them the ability to fight those particular units.
A solid strategy using woods is to put AA and AT guns in them. Along with Recon and infantry, this can provide a good defense, and probably will need artillery and recon to be eliminated. Infantry is the best way to counteract units in the forest, but with superior numbers.