Let's see if we can do this step by step
1. You receive conscript companies either from your regions or from events. These are stored in a national pool, which you can see at the top of the screen, and you can also see projected totals in various places (e.g. the replacements screen as you say).
2 You use conscript companies in two ways:
2A: Buy reinforcements (new units). This is pretty straight-forward; the units spend a variable amount of time on the map, building strength, and become available after a short or longer while.
2B: Buy replacement chits. These are bought and collected in separate pools for each type of element (e.g. "line infantry" or "cavalry"). By themselves, replacement chits don't do anything, nor can you use them directly, but they are needed for repairing and replacing elements.
3 Your replacement chits can be used in two ways:
3A Repairing damaged elements. Damaged elements will recover some of their strength each turn; the rate will vary based on type of element, where it is located and whether it's a Union or CSA element. There is a chance that each element replacing losses like this will spend a replacement chit, but it's not certain it will. Note that even if an element wouldn't have spent a chit while repairing itself, it still requires that there is at least one chit in the appropriate pool for any repairs to occur.
3B Replacing eliminated elements. Units that are missing elements compared to their original TO&E can recover one of them each turn. This will spend a replacement chit of the corresponding type
For some details concerning this, check out http://www.ageod.net/aacwwiki/Manual:Losses_and_replacements
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