You will need to level up the unit to max level using cash and scrap. When your unit is at max level, you can 'Rank' the unit to add a star.
The number of units that you need to rank up your units to the next star level depends on the number of stars.
After you rank up each unit, it can be used to rank up your next tier units.
1 Star units require one 1 star unit, which will then become a 2 star unit
2 Star units require two 2 star units, which will then become a 3 star unit
3 Star units require three 3 star units, which will then become a 4 star unit
4 Star units require four 4 star units, which will then become a 5 star unit
5 Star units require five 5 star units, which will then become a 6 star unit