Resources come in the form of wood and iron, corn and meat, food and wine and also gold. Both wood and iron are non-renewable and used mostly for construction and research. Corn and meat come from farms and are used to make food and wine in the workshops. You can have up to five peasants in the farms and workshops and can decide what you want them to work on. Without food and wine, your army will eventually starve to death, so you could say it's all a little bit important.
Gold is taxed from the people and used for just about everything.
Once you've got a stable economy going, it's time to start building your army. In fact it's usually a good idea to do this early because chances are that the enemy will come knocking on your door sooner rather than later. Once you've finished fiddling with your Ballacks, you can consider mounting your troops. I'm talking about putting them on horses, of course. Horses make the troops faster and able to take much more punishment.