Honor is used to increase your rank to unlock new ties of buildings, acquire free heroes and to change your race via your castle building. You gain honor by doing quests and by engaging in player vs player combat. (this includes plundering other player castles)
The ranks are as follows.

Page 150 honor required – Unlocks Vega (adds 20 bronze supply)
Squire 250 honor required – Unlocks Stables, or race equivalent. (adds 20 bronze supply)
Knight 400 honor – Unlocks Grimms, ability to change to the Dwarf race (adds 20 bronze supply)
Baron 800 honor – Unlocks the siege weapons building (adds 20 bronze supply)
Viscount 1500 honor – Unlocks Gazul and the ability to change to the Lich race (adds 20 bronze supply)
Count 3000 honor – Unlocks Priest, or race equivalent (adds 20 bronze supply)
Marquis 5000 honor – Unlocks the final free hero Virion (adds 20 bronze supply)
Duke 10 000 honor – Unlocks your race’s super unit, such as the Angel (adds 100 bronze supply)
Prince 25 000 honor – Unlocks the greater tier of super unit. (adds 100 bronze supply)

Note that ranks Baron and above require you reside in a city that is not your capital to use those buildings and supply, the heroes will still be available even while in the capital.

Ranks Duke and Prince require you to be a governor of any city for Duke and a large or giant city for the rank of Prince.