The number shown is the number of Churches a village is within the radius of.
If you attack from a village that is not in the radius of a church your troops fight at half strength. (It does not matter if the target is in the radius of your churches, only the village the troops are attacking from.
If you are attacked your troops fight at half strength if the defender's village is not in the radius of one of the defenders churches.
For more detailed strategies regarding churches I'd read the following thread:
http://forum.tribalwars.co.uk/showthread.php?t=480
