Imperial type factions: Their morale will be determined by how many losses they take. If the faction loses three minor battles (less then 50 ships combined between attackers and defenders) or 2 major battles (more then 50 ships combined) then their morale will lose a point empire wide. The starting, and max morale is 10. Once it hits 4 the empire is in a state of unrest. This allows enemy factions to take planets by eliminating ground forces (planetary bombardment on military installations would suffice*) the then military free planet could then join the faction.
* Note that the GA strongly condemns planetary Bombardment, and use of this would strongly affect GA's morale.
GA type factions (beuracracies): Their morale is determined by causualties. This is the combined casualties from ground, air, and naval forces. If they lose 1 million men in a single battle, they lose a point. They also lose a point per 2 million (IE 4 million casualties, lose 2 points). If the factions morale gets below 5 they are in a state of unrest. Eliminating planetary garrison can turn the planet to who ever eliminates the garrison.
Both factions morale is also tied with their faction mottos. The Empires is Use of force not the threat of force. By using aggressive tactics and not diplomacy the Empire can gain in Morale. Every Warlord and Major Faction will have a motto. Both Factions are also affected by Major Events. The loss of Coruscant would be crushing for the GA, but taking it would be a great boon for the Empire.
Unrest: You can deal with unrest in a few ways. First is to increase the on planet garrison. If your unrest threshold is reached (4 for the empire, and 5 for the GA) the planets populations will begin to riot. You will lose productivity in your shipyards, and even you planetary based facilities wont be as effective. They will also begin killing the regiments on the ground. If they manage to eliminate all ground troops (ground troops and fighters) and there is no navy in orbit, the planet will turn neutral. The other way to deal with unrests is to add ships. Number helps as does power. IE you can add a few Imp Stars, and get a decent result, or you can add a viscount and have a better result. A planet can not go neutral with a fleet in orbit. Faction leaders can also visit the planet to help with the Unrest. They can promise that the planet is protected and wont fall into enemy hands or that the planets trade income will increase. It is however suggested that the Faction leader do as they say they will....
Other notes: Also during a period of unrest a new warlord would have a few more options. First they can take two planets from the faction itself. These can not be above Industrial planets, and can not have shipyards on them. This does however cancel the Warlords protection period. The second option is the warlords can take more advanced technology/or vessels. These do have to be approved by Admin.