Guild Battles occur between two guilds and is one of the methods of ranking guilds. Each guild is limited to four offensive and four defensive engagements at a time.
To start a battle with a rival guild, go to the Guild List tab, and click on the Battle List sub-tab. You will be presented with a list of currently-available guilds that have a similar size and number of Guild Points. To the right of the guild name and size, there is a button with which guild officers may initiate battle with that guild.
This method is still not consistent, and you will often receive the message "this guild has reached the maximum number of defensive battles".
On the Battle List, above the available guilds, there is a blue button labeled "Auto Match". This enters you into a pool of auto-match guilds, and will be randomly match up with another guild of similar size and Guild Points. This matchup occurs every 5 minutes, and if there is not a suitable match for your guild when the matching occurs, your guild will be entered in the next round until you get a battle.
This feature was added a few weeks after guild battles were added, and seems to be much less error-prone than trying to pick a fight.
No matter if you initiate battle directly, through auto-match, or via a Guild Monster battle, the mechanics are the same: you are presented with four gates' worth of opponents and can attack any of them you wish. Their levels, current and total health, and character class are all displayed next to their name and image. Buttons to attack them or to select your special ability are on the right-hand-side of each opponent's entry.
When you attack an opponent, you are entered in a duel against them and are matched up using your best attacking equipment and your general's stats and modifiers. If you win, you will deal full damage and your character class ability will activate. If you lose, your abilities will not activate but you will still do some damage. You will receive damage and activity points either way.
Your health goes through the following stages as you take more damage: Healthy, Fair (?), Weakened (200 or less health), Stunned (0 health). Once you are stunned, you cannot be healed anymore. Also, you do half-damage during attacks, your class ability does not work and your class upgrade does not work.
Each time you attack, win or lose, you are rewarded with activity points (100-200 per attack). The amount depends on your level relative to the person you attacked… attacking a higher-level player gains you more activity points.