The word alliance has two definitions in OGame.
An official alliance of players, or the alliance of two official alliances with each other.
Alliance of players Edit
These are groups of players who band together under a single banner or Tag as it is called in OGame and work with each other to improve their gaming experience. This can be either through Trade, War, or Diplomacy.
The Founder is the owner of an alliance. Founders have all rights in the alliance and cannot be kicked from the alliance. To transfer founder status, the Right Hand right is needed by the new owner.
A tag is a short-hand version of an alliance name. It is usually enclosed within square brackets .
Users can use this tag on IRC to indicate to people outside the alliance that they are a member of said alliance.
The tag is also used on the statistics page.
Between two Alliances Edit
When applied between alliances as described above, an alliance refers to the cooperation, or diplomacy, of two or more alliances. Such agreements may include Trade Agreements, military support or other supporting actions.
There is no limit to the number of allies an alliance can have.
Also, note that an alliance is very different from an NAP (Non Aggression Pact).
Note: One downside to alliances are "wars" that can be declared on your alliance; this removes the bashing rules and allows you to be attacked as often as the other alliance wants.