What is that? In this game it means the Willingness of your population to comply. When a village is unhappy, e.g <50 rates, you will notice you can’t recruit soldiers, build or receive income. You will need to appease them with edicts if you want them to work for you. Edicts are instant but can be costly depending on the population of that village/edict chosen. Keep in mind that not all edicts regard happiness.
A good way to negate Happiness from becoming a problem is by engaging (and defeating) the other nations 1-by-1. You can ally your surrounding nations and they will just slaughter each other and leave you free to swoop in (cancel a relation, wait for 2 turns, start the war), kill the stragglers, get the “loot”.
Mind you that dropping a long-time friend may cost you -25 happiness and another -15 happiness after 2 or 3 turns of the cool-down period to start the actual war. If you started that at 100 happiness, then it is not really a problem. But that is generally not the case. Stone is the resource needed for buildings required to increase village happiness over time and Food to enable edicts to increase happiness instantly. You’ll be buying Stone by the tens of thousands in 1 game. Bakeries at first (mid-game) and arena’s (late-game).
So what makes Happiness the deciding factor and not Stone, Wood, or Iron? Well, in terms of resources: Food>Happiness>Stone>Wood>Iron. Considering Food has already been discussed, if your population’s happiness isn’t properly managed, and you don’t have the resources, you’re dead in the water for quite a few turns and may not recover altogether.
Buying Wood is slightly more apparent in the beginning. But once you start racking up Lumberyards (not that there are many, it’s just that you don’t need many) you’ll notice you don’t need as much as you did in the beginning. And Iron is the least of your worries. One upgraded Iron Mine and the occasional purchase from the market will be enough. Stone as a material resource, however, is required to make the majority of the buildings. Unit buildings and Happiness buildings. There are economic buildings too, but that’s really a sideshow to your problems.