The average peasant distrusts anything unusual, and so will only work for familiar religions. For this reason, priests may only recruit peasants in provinces which contain a temple of their religion. Because of the basic enmity between magicians and priests, neither will stack with the other. Of course, if either or both are cloaking their professions, stacking is possible. Also, priests will not stack with any unit possessing undead.
Priests also give troops great encouragement when attacking magicians or undead.