A Pact of Brotherhood (or Pact of Sisterhood) is the closest form of diplomatic relationship you can form with another faction. Pact Brothers may enter each other's territory freely, may stack with each other's units, and may enter each other's bases (and receive repairs there).
Pact Brothers are expected to defend one another from enemy attack. They receive double commerce between their bases, and are often willing to share technological research.
A pact can be terminated at any time (the right-click menu on the Commlink menu is one way to do it), but at the moment of termination all your units will automatically be shipped home from your former Pact Brother's territory, and vice versa.