From Galaxypedia

Territory is how much area a faction has (i.e. How far faction ships have ventured into space). You generally gain more Territory the higher your faction's power level, which is tied to the amount of ore in your base. The more ore there is, the faster the gain in power and territory. If you lose too much or have another faction completely take your faction's territory over, then you could possibly be assimilated into another faction. Territory also influences which faction owns starbases and planets (at times the Territory between two or more factions will clash against each other). There is a non-assimilation area surrounding the Mega Base. Once 95% of Territory is conquered by one or more factions, the endgame begins. Territory will also show on the minimap.