In a campaign, just as you can replace units which have been destroyed, you can replace units which have not been destroyed - effectively upgrading them, e.g. you start with a platoon of Pz38(t)es, blow up about 300 M3s with them and change them, one by one, to say, KTs. You are effectively rewarded for taking fewer losses by being able to spend replacement points on upgrades.
Upgrades are essential for you armour in any long campaign as your tanks will become obsolete. Less critical for infantry, tho' units can be tailored to specific roles - such as by replacing rifle-armed units with SMG-armed units. Inf AT weapons are one type of weapon that definitely benefit from being upgraded, tho' their value as core forces in a campaign is questionable.
One annoying thing is, if UK or GE, your troops can actually worsen during a campaign. This happens when you upgrade them: the FC of your BR Inf Sec will drop from 4 to 3 when you upgrade them after early 1943; similarly, GE Inf decline from 3 to 2 later in the war, tho' their armament obviously improves (Pzfaust:D ). Whilst this FC decline represents a dilution of the professional elite in the Br Army/Wehrmacht - as is nice and realistic - it is frustrating in long campaigns as those carefully-shielding Inf Secs actually get worse.
Going (just a little) off the point here - but it does need noticing:
1. BR SMGs suck. Sten guns are awful. BR Paras are suicide squads.
2. BR forces in a long campaign suffer from being unable to improve their troops. All other major armies have better infantry types one can upgrade grunts to, e.g. GE: Rifle-FJ-SS; SO: Conscript-Rifle-Guard, whilst US troops get a hell of a lot better as the war progresses and they learn which end of the gun to point at the bad guys. BR forces do not have this: if you upgrade to Paras, their effective combat range shrinks to two hexes; Commandos and SAS also suck like this. There ought to be Guards units for BR formations, if only to allow this upgrade potential.
3. Sten guns suck. Even more than Bren carriers. And Cruiser IIs.
4. US Rangers vs SAS. Noted in recent Iraq conflict interesting difference between US and UK terminology - at least amongst the media

- specifically the meaning of the term 'Special Forces'. UK 'Special Forces' are SAS/SBS and nothing else - a tiny elite. US 'Special Forces' actually outnumber the British Army. Back to the first point - why are SAS forces not elite in SP:WaW?
5. Umm... oh yeah, I hate Stens.
Sorry for rambling.
Rask.